What is the effect of a leveraged donation program?

Canada (Federal), Canada

The following excerpt is from Herring v. The Queen, 2022 TCC 41 (CanLII):

The facts in this instance closely resemble those of Maréchaux v. The Queen, 2009 TCC 587 (“Maréchaux TCC”) that also involved a leveraged donation program. The taxpayer in that instance pledged to donate a certain amount and advanced 30% from his own resources. The remaining 70% came from a loan offered by a lender associated with the charitable organization. The loan was interest-free with a term of 20 years. An additional 10% of the pledged amount was paid as a security deposit and as a fee to arrange the loan and cover the cost of insurance should the investment returns of the security deposit not be sufficient to eventually extinguish the loan. Participants could assign the security deposit and insurance policy to the lender in full satisfaction of the loan. The appellant exercised this right, also described as a “put option.”

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