$17 Million Gift to Private Foundation Ineligible for Tax Credit

  • November 08, 2021
  • Terrance S. Carter and Ryan M. Prendergast

The Tax Court of Canada decision in Odette (Estate) v the Queen demonstrates the importance of being fully aware of the particular requirements regarding gifts to private foundations of non-qualifying securities (“NQS” as explained further below). The Tax Court of Canada decision, published on September 28, 2021, dismissed an appeal by the taxpayer from an assessment made under the ITA for the 2012 taxation year which denied the taxpayer a charitable donation tax credit.

The Estate of the Late Edmond G. Odette (the “Taxpayer”) was the sole shareholder of Edmette Holdings Ltd. (the “Corporation”). Mr. Odette’s wills left the residue of the Taxpayer estate, including all of the shares of the Corporation, to the E & G Odette Foundation (the “Foundation”), a private foundation not at arm’s length from the Corporation. The Taxpayer obtained advice about how to transfer the shares of the Corporation to the Foundation and, based on that advice, entered into a series of transactions. First, on December 20, 2013, the Taxpayer transferred the shares to the Foundation as a gift, recognizing it was an NQS. Then, on December 23, 2013, the Foundation disposed of the shares to the Corporation for cancellation by accepting a non-interest bearing promissory note back from the Corporation as payment for the shares. Finally, the Corporation made three cash payments totaling over $17 million dollars to the Foundation between April and August 2014 in satisfaction of the promissory note.