Tax Shelter Gifting Arrangements:

Over the years a few of our clients have participated in Tax Shelter Gifting Arrangements.

Tax shelter gifting arrangements are not deductible.

Canadians tend to be generous when it comes to making charitable donations. In 2005, more than 5.8 million Canadian tax filers donated a record high $7.9 billion to registered charities.

Charitable donations to registered charities means a tax credit for taxpayers however, there are some schemes being promoted across Canada that are trying to take advantage of this legitimate tax credit. Canada Revenue Agency has issued warnings about potential tax shelters and the consequences for claiming questionable donations.

Typically the promoter issues a donation receipt for three to four times the amount of the actual donation. This will result in a larger tax credit than you are actually entitled. The CRA has successfully challenged these schemes in the courts. However, variations continue to spring up.

The CRA is already reassessing more than 26,000 taxpayers who participated in the more recent versions of these schemes and have already denied approximately $1.4 billion in donations claimed. There are more audits underway so the number of taxpayers affected will grow.

Taxpayers who were reassessed will be facing a tax bill. The CRA will usually reduce the donation credit to the actual cash paid or the value of the goods actual donation.

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