A Canadian tax payer has many different potential tax credits available to them, but in order to receive these they have to qualify for each one according to the regulations that govern them. Included in these are donations to charities which do not include the gift of money but other items of worth. For example, an individual could give a piece of art or land to a charity.
This gift giving system in respect to tax credits sometimes becomes abused. The recipient of the gift will issue a receipt to the giver for a much higher amount in cash value for the item so it can be claimed on the tax return of the giver. Recognized charities have a government number assigned to them which recognizes them as a charity for their tax purposes with the CRA. This is called a tax shelter number and serves as an easier way for the CRA to keep track of the charities and for audit purposes.
The tax department has become much more rigid with charities that are inflating their receipts and in many cases have denied the claim for the gift and have reduced its worth to nothing for the giver. This means those that invested by giving the gift no longer have the article and now have to pay taxes on the value that was placed on the item plus penalties and interest owed on that sum of money.
Unfortunately the popularity of scam type gift shelters has risen significantly and it is now causing the CRA to be far more critical in their approval of claims that relate to this. These schemes can be rather sophisticated where third parties were actually involved like lawyers that would provide opinion letters regarding the gift transaction supposedly to add credence to the transaction. There are cases before the courts now concerning this.
Now for those who are going to make a claim regarding a receipt for a gift giving tax shelter the receipt will not be assessed unless the CRA has conducted an audit of that shelter. It has become quite complex regarding tax returns that are including claims regarding tax shelters and for those in this situation it would be wise to have a quality Toronto accountant do your tax return for you.
If you live in the Toronto area you may want to consider Sam Seidman as your choice of a Toronto accountant to prepare your returns for you.
