Digest: Diewold, Re (Bankrupt), 218 DTC 5062

• Date: May 14, 2018

Reported as: 218 DTC 5062 , 2018 SKQB 149

Docket Number: QB17534 , BKY 480/17 JCR

Court: Court of Queen's Bench

Date: 2018-05-14

Judges:

• Thompson

Subjects:

• Bankruptcy and Insolvency � Discharge � Income Tax Debt

Digest: The Canada Revenue Agency (CRA) opposed the bankrupt�s application for discharge. It established that the bankrupt owed $263,800 for personal income tax. The debt was incurred in 2003 to 2008, 2010 to 2012 and 2016 and it made up over 99 percent of the unsecured proven claims. The bankrupt, a 64-year-old pensioner, had assets worth $425,250 composed of an unencumbered home valued at $250,000 and RRSP�s valued at $129,000. The trustee estimated that only $5,100 was realizable for the estate. The bankrupt had no available surplus income and was working part-time to make ends meet. The income tax debt arose because the bankrupt participated in a fictitious donation scheme that was designed to create inflated refunds and help its participants avoid paying income tax. The CRA submitted that the bankrupt knew or ought to have known that the scheme was fictitious and that she participated in it to avoid taxes. The scheme involved a tax payor making a cash payment to the Millenium Charitable Foundation (MCF). The payor would then apply to become a capital beneficiary of the Global Learning Trust and receive a distribution from it in the form of a licence to use courseware. The payor would then donate the courseware licence to the International Charity Association Network (ICAN). MCF and ICAN would then issue receipts representing the amount of the cash payment and ICAN for the value of the courseware licence. The taxpayer then claimed the amount of both receipts as support for a tax deduction that resulted in a positive return from 56 to 112 percent of what had been contributed. The bankrupt testified that she believed the tax shelter was lawful and until 2008, the CRA had not indicated otherwise. She made no donations after 2005 but she did carry forward contributions from those donations in the following years. When she was informed by the CRA...