The taxpayers were participants in leveraged donation transactions, which were intended to result in a step-up of the adjusted cost base of courseware licences (e.g., on how to use Microsoft products) under ss. 69(1)(c) and 107(2) (apparently with a view to avoiding s. 248(35)) before the licences were donated by them at a higher stipulated value to a registered charity ("CCA").
The licences were gifted to a Canadian–resident Trust with a corporate trustee. Ostensibly, the licences then were distributed to the program participants such as the taxpayers after they had been added as capital beneficiaries, with the participants then donating them to CCA.
After noting that there was no wording in the Trust Deed authorizing the Trustee to delegate any power to appoint capital beneficiaries or the power to determine the amount of any distribution of property to them, Pizzitelli J found that the participants had not been validly appointed as capital beneficiaries, and there had not been a proper distribution to them of any capital property of the Trust, as the Trustee had had no involvement in their applications to be approved as capital beneficiaries nor in the determination of what property which was distributed to them, which was done by an individual, associated with the promoter, pursuant to a computer algorithm.
See summaries under s. 118.1 – total charitable gifts and s. 104(1).