Can you give example of charitable gifting/tax shelters? Why is it risky?
The reason they are so risky is because essentially you are buying something that for the sake of argument is worth $1,000, you are then saying that there's another buyer, who happens to be a charity, who is prepared to buy this same item of say $30,000 a short time later on a donation basis, and will issue a charity donation for this amount.
Naturally CRA has few problems with this arrangement, namely how the fair market value can mysterously jump by such large amounts. They have a couple of options at their disposal, the simplest of which is to take away the ability of the charity to give donation receipts acceptable for tax purposes, and to key into any client who claims a donation for this particular company and flag them for review.
I have so many mazagines that cross my desk in a week or two that it's almost stupid and virtually all them advise avoiding this type of scheme. Worse yet, an advisor who knowing promotes this type of arrangement and/or should know better than to simply rubber stamp it on a tax return, is potentially liable for penalties. And why Miss Jasmine would disputing a Notice of Reassessment is like a parking ticket is a mystery to me. I can only assume she's never personally be involved in something like this, cause it's pretty far from a parking ticket in my view. But don't take my word for it, just google charitable tax schemes or things of that nature and read up on it.
btw the following is taken directly from CRA's website under Charities and giving; information for donors.
http://www.cra-arc.gc.ca/chrts-gvng/dnrs/lrt/menu-eng.html
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If you hear about a tax preparer offering larger refunds than other preparers, don't be fooled! While most preparers provide excellent service to tax filers, a few unscrupulous return preparers file false and fraudulent tax returns and ultimately defraud their clients.
Remember that even if someone else prepares your tax return, you're the one responsible for all the information on the return.
•Stay away from return preparers who offer you false tax claims. This could include false charitable donations or false child care expense claims, or maybe even false business expenses or losses. Don't get involved. You will be caught.
•Never sign a blank tax form.
•Use a reputable tax preparer who provides you with a copy for your records.
Report it.
The CRA takes abuse of Canada's tax laws very seriously. Tax fraud places an unfair burden on law-abiding taxpayers and businesses, and it jeopardizes the integrity of Canada's tax base.
If a tax preparer is offering you fraudulent tax preparation services, or if you want to report a tax cheater, you can do so anonymously by contacting the Canada Revenue Agency's Enforcement Division at your nearest tax services office.
Made a mistake? Come to us before we come to you.
To correct inaccurate or incomplete information or disclose material you did not report during previous dealings with the CRA, you can come forward through the CRA's Voluntary Disclosures Program. If you make a full disclosure before any compliance action or investigation is started, you only have to pay the taxes owing plus interest.
The bottom line.
Failure to follow tax laws will result in consequences. In addition to fines imposed by the courts, which can represent up to 200% of the taxes evaded, and jail time, you still have to pay the taxes owed and all other civil penalties and interest imposed by the CRA.
In 2005-06, taxpayers were convicted in 293 cases of tax evasion or fraud. Taxpayers had to pay close to $14.4 million in fines, and were sentenced to more than 33 years in jail. These convictions related to revenue loss of $13.4 million. CRA investigations work led to convictions in 94% of cases prosecuted during the 2005/2006 fiscal year.
Stay alert and stay informed.
For more information on alerts, fairness and rights, or to read about recent tax evasion convictions, visit
www.cra.gc.ca.
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And if that wasn't clear enough, here's something else they posted on their website:
The CRA is auditing all gifting arrangements
Taxpayers should be aware that the CRA plans to audit all tax shelter gifting arrangements. Every audit completed to date has resulted in a reassessment of tax, plus interest. In many cases the CRA has denied the "gift" completely. Penalties will be considered, especially where an investor was audited and reassessed for previously participating in a gifting arrangement.
Stats and Facts
•To date, the CRA has reassessed over 26,000 taxpayers who participated in these schemes, and denied about $1.4 billion in donations claimed.
•Audits of another 20,000 taxpayers involving $550 million in donation claims are just about complete.
•Audits on other arrangements involving over 50,000 taxpayers are about to begin.
Current Promotions
New schemes are being marketed that claim to be different from those for which the CRA has previously issued warnings. Taxpayers should avoid all schemes that promise donation receipts for 3 to 4 times the cash payment. It is the CRA's position that the proposed legislation, effective since 2003, will apply to reduce the donation credit to no more than the actual cash payment. Furthermore, as indicated above, completed audits have shown that there was effectively no gift being made in many cases, and as a result, the donation was reduced to zero.
Packages promoting these schemes sometimes include letters of commendation about the particular charity, which can give the impression of endorsing the scheme itself. These letters should not be interpreted as providing any assurance that these schemes do what they claim to be doing or that the promised tax benefits are in accordance with the Income Tax Act.
http://www.cra-arc.gc.ca/nwsrm/lrts/2007/070813-eng.html
