It is tax time so just a reminder that there are still “abusive charity gifting tax schemes“ which promise that you will yield more tax savings than your investment/donation. CRA has already declined over $7 billion worth of receipts from schemes like these. Best to avoid them at all costs.
I still get emails from people who invested in these schemes. Sometimes they invested many years before and they are still dealing with the CRA audits and also sometimes problems from the promoters of these schemes. We don’t represent charities who deal with the schemes, we don’t give legal opinions on these schemes and we don’t help people who got suckered in by these schemes as we are not tax lawyers.
Give your money to real charities and avoid abusive schemes.
We have been covering these schemes for over a decade, and if you type in “abusive” and “gifting” in the search engine on our website, you will see lots of articles.
Also here is some high-level information from CRA:
Abusive tax shelter gifting arrangements
An abusive tax shelter gifting arrangement typically promises individuals that are being asked to participate, tax savings greater than their cost to participate in the scheme, thus allowing them to profit from “donating” to a charity. Prominent examples of such schemes include buy-low, donate-high schemes, gifting trust arrangements, and leveraged cash donations.
The CRA has found many of these arrangements provide little or no benefit to the charities involved or to their intended beneficiaries. Instead, many of these arrangements exploit a registered charity’s receipting privileges for the private gain of promoters and participants.
The CRA has repeatedly warned registered charities against becoming involved in abusive tax shelter gifting arrangements. The CRA has ongoing and serious concerns about these abusive arrangements. Registered charities should be aware that participating in such arrangements can jeopardize their registered status or expose them to monetary penalties.
The CRA reviews all tax shelters to ensure that the tax benefits being advertised meet the requirements of the Income Tax Act. Although the CRA issues identification numbers to tax shelters, these numbers are for tracking purposes only and do not mean that the tax shelter transactions have been approved by the CRA as legitimate. An identification number allows the CRA to identify and track tax shelters and their investors but offers no guarantee that taxpayers will receive the advertised tax benefits. The CRA regularly audits such arrangements; it reassesses participants and disallows donations claimed. In many cases, the CRA has reduced the donation amount to no more than the cash paid by the taxpayer. When the donation is not a true gift, the CRA will reduce the claim to nil.
The CRA intends to challenge any arrangement that does not comply with the Act. Charities that knowingly exploit their tax-receipting privileges by participating in schemes that are abusive or fraudulent, or that fail to devote their resources to legitimate charitable activity, will be subject to revocation and/or significant monetary penalties. In addition to penalizing charities involved in these arrangements, the CRA may also apply penalties against those persons who promote such arrangements or who participate in the making of false statements to the CRA.
For more information, go to Tax shelters.