“Donating items rather than cash can create tax advantages but it’s important to understand that the CRA does review the valuation of those items.”

 Rob Storoschuk, CPA, CA, LPA from Millards Professional Accountants in Brantford advised clients that donating “things” rather than money is an option but that your valuation for those items can be scrutinized by industry professionals retained to confirm your valuation.

Storoschuk cites an example from a recent Tax Court of Canada case. 

 “The taxpayer donated several bottles of wine to a registered charity over three years and received donation receipts totalling $10,700 for what they believed was the fair market value of the wines.” 

 The submitted value of the wines for the donation receipt was questioned by the CRA and they called on a Sommelier to evaluate the donated wine. The Sommelier, a graduate of the Oenology Faculty of Bordeaux, did not share the same taste for the wines in question. As a result of his findings, the CRA significantly reduced the donation receipts by a total of $7,331 based on their separate valuation.

 The taxpayer protested the CRA’s findings and the case ended up in the Tax Court of Canada.

 The Court accepted the taxpayer’s valuation of the wines noting that the Crown did not produce evidence contrary to the taxpayer and failed to raise doubts about the credibility of the Appellant’s testimony.

 Think about your donations carefully advises Storoschuk. 

 “While the Tax Court of Canada ruled in favour of the taxpayer in this case, it does reveal that there are challenges when donating items instead of cash. If you are donating large value items, ensure that the amount listed on the donation receipt is backed by credible proof or valuation.”

Storoschuk strives to find tax saving opportunities for families. His practice areas include accounting and taxation for owner-managed businesses and he has a special interest in health care professionals, investments, real estate and construction companies.

 If you have any questions about tax receipt donations or any other accounting challenge, please contact a Millards Professional Chartered Accountants office near you.