The taxpayer agreed in December 2001 to make a $100,000 donation to a charitable foundation, comprising $20,000 of his own funds and $80,000 from a non-interest bearing 20-year loan. He spent a further $10,000 of his own funds on a "security deposit" together with an insurance policy to ensure against the risk that the security deposit would not accrete to $80,000 in 20 years' time. In January, 2002, the taxpayer assigned the security deposit and the insurance policy to the lender (who was owned by the tax shelter promoter) in complete satisfaction of the $80,000 loan.
Evans JA found that the donation was not a gift, given the Tax Court finding that the $80,000 interest-free loan was a significant benefit that the taxpayer obtained only by making the donation. Furthermore, the taxpayer had a reasonable expectation at the time of making the donation that he would be able to assign the security deposit and the insurance policy to the lender in satisfaction of the loan, which represented a further benefit to him. It was irrelevant that the benefits came from a third party.
The Court of Appeal agreed with Woods J.'s further finding that the taxpayer's $20,000 initial outlay was also not a gift. She stated (at TCC para. 49): "There is just one interconnected transaction here, and no part of it can be considered a gift that the appellant gave in expectation of no return."