Every once in a while, the Canada Revenue Agency, in its efforts to help
Canadians comply with our myriad and often overly complex tax laws, sends out
friendly "Did you know..." press releases called "Tax Tips."
Take, for example, the CRA's latest tip, released earlier this month, wittily
entitled "Helping Others Could Help You, Too!" The PR folks at CRA, perhaps
borrowing a line from the Tony-award winning Broadway musical Avenue Q ("When
you help others, you can't help helping yourself"), remind Canadians of the tax
advantages of making charitable donations.
After describing the charitable donation tax credits available, the CRA makes
a somewhat surprising statement: "if you are married or have a common-law
partner, you can pool your donations together."
This statement reflects the long-standing administrative position of the CRA
that spouses may pool their donations together in order to take advantage of the
higher donation credit for donations over $200 in a year. What's surprising,
however, is that there is no legal basis whatsoever in the Income Tax Act to
allow such pooling of donation receipts between spouses. What's even more
astounding is that the CRA is not bound to assess taxpayers based on this
administrative concession, as Dennis Douziech found out in the Tax Court several
years ago.
Mr. Douziech was married in June, 1998, and for the 1998 tax year pooled his
donations together with his wife's and claimed a charitable donation credit for
$10,500 on his 1998 tax return. The CRA denied his claim for the charitable
donation credit because the donations were made by his wife in 1998, but prior
to his marriage date. In other words, the CRA claimed since they were not
actually married at the time the donations were made by his wife, he could not
claim them, even though the couple filed their1998 tax returns as "married."
Mr. Douziech relied on the CRA's administrative policy, which is clearly
stated in two widely used CRA publications: the Income Tax and Benefit Guide,
and a pamphlet called Gifts and Income Tax.
The judge, in commenting on the CRA's policy of generally allowing the
spouses to combine donations, stated that this pooling "will normally, as a
result of administrative practice, be accepted. There is [however] no legal
authority for doing so, and I do not have the power to change the law."
As a result, the judge dismissed the donation claim, but not before
commiserating with Mr. Douziech: "I am not unsympathetic to your position in
this matter, because it ... appears that you are not being given the benefit of
an administrative practice that has been adopted and applied more or less
universally by [the minister] in assessing people under the Income Tax Act ...
But my hands are tied by the law as written by Parliament, [and] in the absence
of an ambiguity, I therefore have no alternative but to dismiss the appeal."
Perhaps this was an isolated case, as the CRA does, generally, accept the
pooling of donations between spouses. But taxpayers should be warned that just
because the CRA issues friendly "Tax Tips," they are no substitute for
professional tax advice.