If it’s too good to be true….

Canada Revenue Agency issued the following warning to  taxpayers about donations to a gifting tax shelter.  For more information check out the following link:

http://www.cra-arc.gc.ca/nwsrm/lrts/2010/l101223-eng.html?=eml20101223

Warning: If you donate to a gifting tax shelter, expect to be audited

Each year, Canadian taxpayers participate in gifting arrangements that result in donation receipts worth three or four times the actual amount donated by the taxpayer. The Canada Revenue Agency (CRA) continues to warn Canadians against these gifting arrangements and audits those who participate.

To date, the CRA has denied over $4.5 billion in tax shelter gifting arrangement donations and reassessed over 130,000 taxpayers who have made donation claims through a gifting scheme.

For most claims, the CRA has denied the gift entirely. The CRA audits gifting arrangement tax shelters that provide donation receipts three or four times the out-of-pocket cost.

Decisions in recent court cases have concluded that the “donation” made by the taxpayer was not a gift or, where it was a gift, the amount did not exceed the out-of-pocket cost to the taxpayer. In the Maréchaux case, the Federal Court of Appeal upheld the Tax Court of Canada (TCC) decision that there was no gift given as a result of the defendant’s participation in a leveraged cash donation scheme. In the Lockie case, the TCC concluded that the gift in a buy-low-donate-high scheme was the amount paid by the taxpayer.

Tax shelter identification numbers

The CRA reminds taxpayers that tax shelter numbers are used for identification purposes only. Just because a tax shelter has an identification number does not mean that donations made to it will result in tax benefits.

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