The taxpayers were participants in a leveraged donation scheme, in which courseware licenses were purchased by a corporation ("Phoenix") from a Florida corporation ("Infosource") which also packaged and sold such licences in the course of its business, contributed by it to a purported Trust, purportedly distributed under s. 107(2) to the participants and then purportedly gifted by them to a registered charity with charitable receipts being issued which assigned a value to the donated licences of several hundred times their previous cost to the corporation (para. 125). After finding that the taxpayers' claimed charitable tax credits should be disallowed for lack of donative intent (see summary under s. 118.1 - total charitable gifts), Pizzitelli J found that the valuation in the charitable receipts was unsupportable for any number of reason, including basic common sense.
One particular deficiency in the scheme promoters' valuation was the failure to consider the effect of the supply of licences on the market. The market in question was the "charitable donation market" in Canada. The reason the courseware preparer was willing to sell the licences so cheaply was because it recognized that the licences would be distributed in Canada to persons who would otherwise be unable to purchase them (para. 105). Within such a narrow market, failing to consider the impact of approximately 3 million licences distributed through the donation scheme was (para. 123):
...contrary to the definition of fair market value, where buyers and sellers would be informed and supply and demand would be an essential element... .
Furthermore, such expert erred in treating retail sales by Infosource as a relevant comparable for valuing the licences here as they essentially had been acquired on a wholesale basis – so that the modest price paid to Infosource represented the licences' fair market value.