Seepersad v. R. – TCC: Court rejects evidence of charitable gifts, opens statute-barred year, approves gross negligence penalties

Seepersad v. R. – TCC:  Court rejects evidence of charitable gifts, opens statute-barred year, approves gross negligence penalties

Seepersad v. The Queen (November 14, 2018 – 2018 TCC 226, Bocock J.).

Précis:  The taxpayers, husband and wife, claimed charitable donations arranged by a financial planner, One Orbit Financial Services (Orbit), they used to prepare their tax returns.  They had no knowledge of the alleged charities and the Court did not accept their claims to have donated cash through Orbit.  Their appeals were dismissed and the penalties sustained.

Decision:   This case follows a pattern of charitable donation scams that has become all too frequent in reported Tax Court decisions:

How the Appellants Come to Meet their Taxpreparers

[7]  Sometime in early 2006, Mr. Seepersad’s uncle directed Mr. and Mrs. Seepersad to attend the offices of One Orbit Financial Services [1] . The two principals of Orbit were one “Frempong” and “Amoako”. One was subsequently convicted of fraud against Her Majesty and other absconded from the jurisdiction and presumably thereby escaped punishment, if not conviction.

[8]  When Mr. and Mrs. Seepersad visited the offices of Orbit in March or April 2006, it was to have their 2005 tax returns prepared. Included in the returns were donation amounts consisting of the 2005 charitable donations described above.

All Money Given in Cash

[9]  All money given was in cash. Rudimentary receipts were given for the considerable, if not usurious tax preparation fees; the fees were $2,100.00 and $1,900.00, respectively for the 2005 and 2006 taxation years. Mr. and Mrs. Seepersad asserted they gave representatives of Orbit approximatively $2,000.00 in cash one week in April 2006 and approximately another $2,000.00 cash in a subsequent week. They stated that the balance of their cash donations were withheld until they received their tax refund. Only Orbit received the cash. No cash was directly transferred by Mr. or Mrs. Seepersad to the desired charitable recipient. A similar process was followed in March/April 2007 for the 2006 taxation year.

[10]  During tax preparation, Mr. and Mrs. Seepersad were advised of the increased tax refund “selling features”. However, both claim their primary motivation, springing from their religious and cultural backgrounds, was to help those in need. They were satisfied that the en bloc sums of cash would make it to the intended charitable organizations. They did not attend any events, worship services or fundraisers for their desired charitable recipients. They knew little of the locations or specific activities of the charitable organizations. Recipient selection, amounts to be given and the transfer of funds were all determined and to be executed by Orbit.

The Court was not impressed and both dismissed the appeals and sustained gross negligence penalties:

[30]  Lastly, the critical and final step to detection is a review of the tax return, particularly where no other basis for reliance exists, such as a longstanding relationship, credible references or reliable third party confirmation. There was simply no basis for reliance, no history of confidence and no inquiries for confirmation in the facts before the Court. Neither Mr. nor Mrs. Seepersad engaged in a review of the tax return reflective of their respective and distinct education, experience and knowledge.

[31]  In summary, the facts within these appeals snag all of the factors which ought to raise suspicion for either Appellant. Regrettably, both Mr. and Mrs. Seepersad independently ignored those. Such volitional aversion was grossly negligent. The penalties shall remain.