Don't be one of the Canadians that get caught up in gifting tax shelter schemes.
Gifting tax shelter schemes 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 the promoters and participants.
How do you spot a gifting tax shelter scheme? Typically, participants invest a small amount of money and receive a tax receipt for an amount several times higher than what they actually spent. Examples of these schemes include buy-low, donate-high schemes; gifting trust arrangements; and leveraged cash donations.
The Canada Revenue Agency (CRA) warns you that taxpayers should be aware that if they receive an official donation receipt for an amount higher than the value of property donated, the receipt is not valid and cannot be used to claim a tax credit. Registered charities can jeopardize their registered status by participating in such arrangements.
The CRA audits every gifting tax shelter that offers official donation receipts in excess of the value of any property donated and to date has not found a single arrangement that complies with the Income Tax Act.
As of March 31, 2014, the CRA has reassessed more than 190,000 taxpayer returns denying in excess of $6.3 billion in donation claims.
We have also assessed more than $162 million in third party penalties against promoters and tax preparers.
Remember, if it sounds too good to be true, it probably is. Think twice before participating in a gifting tax shelter scheme. More information is available on the CRA website at www.cra.gc.ca.
