A new Federal Court of Appeal decision is an important reminder for Canadians claiming charitable donation tax credits.
In Malone v. Canada, 2026 FCA 166, taxpayers participated in a donation program involving cash contributions and software licences.
Participants contributed cash, purportedly received software licences worth substantially more, donated the licences to charities, and received charitable receipts for both.
CRA denied the donation tax credits.
The Tax Court agreed—and the Federal Court of Appeal has now dismissed the taxpayers’ appeals.
3 IMPORTANT TAX LESSONS
1️⃣ Good intentions aren’t enough
The taxpayers argued that they genuinely wanted to help others.
But donative intent is assessed objectively.
The Court considered whether participants actually intended to make themselves poorer through the gift. The expected tax benefits significantly exceeded their cash contributions, which worked against them.
2️⃣ An appraisal doesn’t automatically prove value
The claimed software values were dramatically higher than the evidence supported.
A document stating an “appraised value” does not necessarily establish fair market value.
Reliable, defensible valuation evidence matters.
3️⃣ Access doesn’t prove ownership
The taxpayers argued that they had access to the software licences.
But there was insufficient evidence establishing actual possession, control or ownership.
DON’T FORGET THE BURDEN OF PROOF
When CRA assesses based on factual assumptions, taxpayers generally carry the initial burden of disproving those assumptions.
That makes documentation critical.
Keep agreements, invoices, payment records, ownership evidence and credible valuations supporting significant tax claims.
📌 THE PRACTICAL TAKEAWAY
Be cautious when a donation arrangement promises a charitable receipt substantially greater than your actual economic contribution.
CRA and the courts can examine:
✓ What you actually gave
✓ Whether you owned it
✓ Its true fair market value
✓ Your economic benefit
✓ Your evidence supporting the claim
The FCA noted that GLGI-related donations generated approximately 1,500 Tax Court appeals—and not one taxpayer successfully challenged the denial of the donation tax credit.
If a tax strategy promises benefits far greater than your real economic cost, obtain professional advice before participating—not after CRA reassesses you.
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