In a June 12, 2018 Tax Court of Canada case (Balkwill vs. H.M.Q., 2015-1651(IT)G), the Court was required to determine the fair market value (FMV) of 21 bottles of wine donated to charities. The taxpayer valued the wine at $23,600, while CRA argued a value of $4,700. The taxpayer’s value was based on the cost to obtain the wine through the Liquor Control Board of Ontario’s (LCBO) Private Ordering program, as the wine was not available off the shelf in Ontario. Note that liquor sales in Ontario are undertaken through this provincial entity, with no private retailers permitted.

Taxpayer loses
The Court noted that “actual, normal, functioning, lawful and available real markets” through which the taxpayer could have sold (not purchased) the wine were the most appropriate source of valuation information. The best evidence available to the Court, records from a U.S. consignment auction house, suggested values inferior to those assessed by CRA. As the Tax Court cannot order CRA to reassess at a lower value (that is, higher tax), the appeal was dismissed.

Court comments
Both parties had asked the Court to offer comments beyond its reasons in this specific case as guidance for similar cases. These comments included the following:

this Tax Court guidance in valuing wine donated to charity

• Retail purchase price could reflect FMV in many cases. One example offered was a bottle of wine purchased off the shelf for donation to a charity auction.
• Examples of potentially relevant evidence would include actual prices in auctions, consignments, charity auctions, and any other available markets.
• Prices of comparable wines not of identical labels or vintages could be used.

In the decision, and outside these comments, the Court also indicated that any regulatory, tax, customs and import duties, transportation and other costs imposed by a governing jurisdiction would not generally impact the valuation of an asset.

This case was also the subject of a June 22, 2018 Financial Post article (How much is that bottle of wine really worth? CRA uncorks valuation battle after challenging donation, Jamie Golombek).