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Revenue Canada has recently re-iterated its warnings around tax shelter gifting arrangements. There are a lot of variants to these plans, but a standard feature is the generation of a donation and gifts tax credit significantly in excess of any actual cash expenditure made by the individual claiming the credit. Buy-low, donate- high art flipping arrangements have been particularly popular. The standard treatment imposed in a reassessment is to reduce the donation credit to the cash payment, or, if an audit of the scheme reveals that no donation to an actual charity took place, the elimination of the donation credit altogether.

To quote Carol Skelton, Minister of National Revenue, “If it sounds too good to be true, don’t fall for it. Taxpayers need to know that the Canada Revenue Agency (CRA) is auditing all tax shelter gifting arrangements.”

Revenue Canada advises reading the fine print before participating, and obtaining advice from an independent tax professional when in doubt.

Form more information, consult Revenue Canada’s website at:

http://www.cra-arc.gc.ca/newsroom/releases/2007/august/nr070813-e.html.

Labels: Personal Tax