Charitable giving tax shelters

Income tax policy, rules, problems, strategy and software. Property and consumption taxes too.

Postby kombat » 09 Nov 2007 14:21

brucecohen wrote:FWIW, your good buddy in Bermuda appears to be Edward Furtak


Yes, that's the guy.

brucecohen wrote:Trafalgar Trading was involved in a tax shelter deal that was recently shot down by the Federal Court of Appeals. Leave to appeal to the Supreme Court has been filed. That case dates back to 1998. Details here


I can't read the article (not registered), but is that case in relation to charity schemes that involved a loan which was then donated to the charity and taken over by Trafalgar? Ron mentioned such a program last night as one of their "older" donation programs, and said it's no longer offered. I don't believe the current structure (donating trust units) has been tested in court yet.
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Postby brucecohen » 09 Nov 2007 15:08

kombat wrote:I can't read the article (not registered), but is that case in relation to charity schemes that involved a loan which was then donated to the charity and taken over by Trafalgar? Ron mentioned such a program last night as one of their "older" donation programs, and said it's no longer offered. I don't believe the current structure (donating trust units) has been tested in court yet.

No, it was a software tax shelter case. Aside from Trafalgar's involvement, my point in mentioning it is that this case took nearly 10 years to make it through the Federal Court of Appeal and may still not be over if the Supreme Court of Canada agrees to consider it.

ISTM, the only way you can get a resolution within the timeframe you want is for the pending legislation to be passed and get royal assent. And that won't be good for you. BTW, this bill retroactively applies changes announced by Finance in December, 2003. I don't see how your Parkland guy can suggest there's any wiggle room for you folks who jumped into the sandbox after that. (CRA's position is that the legislation will be enacted -- which it will -- and since it'll be retroactive, they're using it.)
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Postby LAJ » 23 Nov 2007 15:30

Hi kombat

Was surfing today and found this on another forum dated Nov 22nd...

" Hello,I just received a letter from the CRA stating that they are going to Re-Assess me for the year 2004 dated Nov 2nd for my $15,000.00 donation to Parklane which I received a receipt for $54,000.00.They say they are reducing my donation receipt from $54,000.00 to $00.00.They are not even allowing the $15,00.00 cash donation,also they say I have 30 days to respond to the letter or they will Re-Assess me."

I would suspect your letters will be forthcoming.
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Postby Bylo Selhi » 08 Dec 2007 11:05

More about GLGI (see upthread). Charity suspension hits tax shelter profit
James Daw wrote:A Toronto charity suspended last week by tax authorities played a pivotal role in enabling taxpayers to make money through their donations. Promoters and donors insist International Charity Association Network has provided useful computer and life-skills training with their help, and that this could ultimately benefit the Canadian economy. But one might ask: At what cost to other taxpayers?

With the aid of ICAN's tax receipts, donors were attempting to claim a tax refund large enough to pay for their donation, while putting nearly as much money back into their pockets.

Global Learning Group Inc., the promoter of the growing tax shelter behind ICAN's impressive revenue figures, is not specific about the financial rewards on its public website. It says merely that "donors may get a cash flow advantage while doing good for others." A blog of one of its marketers does, however, spell out the potentially lucrative deal down to the penny.

It's highly likely Canada Revenue Agency would have eventually challenged the donors' claims for charitable tax credits. The CRA warns taxpayers every year about the risks of such schemes. But a recorded message at Global's toll-free telephone number cheers on participants with the assurance they are backed by a nearly $1 million legal defence fund. What the message has not mentioned several days after ICAN lost its authority to issue tax receipts is CRA's unprecedented strategy of attacking the charity over its bookkeeping...

And for irony buffs:
Rival tax-shelter promoter David Singh of the Destiny Group of Companies in Markham said that, in light of ICAN's suspension: "I would tell my mother not to touch (Global's tax shelter) with a 20-foot pole."
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Postby Peculiar_Investor » 14 Feb 2008 09:30

kombat wrote:So I went to the meeting last night, and it was actually very informative.

[stuff deleted]

The legal challenge to this program hinges on the definition of a "gift." Ron Olsthoorn (the president of ParkLane Financial Group, the guy who was running the meeting last night) cited several instances of case law which support his assertion that the donors "motivation" is irrelevant, despite the CRA trying to claim that if your sole motivation for making a donation is to receive a tax benefit, then it is invalid.

He also mentioned a "test case" that is already before the courts that would establish the definition of a "gift" and set the precedent for the program we participated in. He has consulted with "hundreds" of lawyers and accountants in constructing the program, and is confident it will hold up in court. The key factor is that there is no property being re-valued, but merely actual cash, whose value is inarguable.

The fly in the ointment, however, is a bill (C-10 or C-33, I can't remember, one was an old one that died and was revived as the other) which is already at second reading in the Senate that would severely limit the amount donors are able to claim (restricting it to the actual cash donation, and excluding in-kind donations). He made it sound like it is currently a race to get the case decided before the bill passes final reading, since it would be retroactive to 2003.

Regarding my own situation, he indicated that even though my "review" is completed and no adjustment is necessary, I could still be "re-assessed" for up to 3 years.

The timeline of my events are like this:

1. Fall, 2006, made an $11,200 donation to charity, applied to be admitted to this Trust, and signed papers directing them to donate my trust units to the same charity, if I'm admitted into the trust.
2. I was admitted into the trust, my units were given to the charity and redeemed for another $30,000. I received 2 receipts: 1 for $11,200 and 1 for $30,000.
3. Spring, 2007 - Filed my 2006 taxes with H&R Block, claimed the donations and a huge refund. Received my Notice of Assessment, and my refund for the full amount I claimed.
4. August, 2007 - Received a letter from the CRA indicating my participation in the ParkLane charities was being reviewed, and asked for supporting paperwork, which I provided.
5. September, 2007 - Received another letter from the CRA, saying I'd been selected for an audit (yes, they used that exact word, "audit"), and that an auditor would be contacting me shortly. To date, no auditor has contacted me. They included literature describing fraudulent donation schemes, and saying that everyone who participates will be audited, and to date, everyone who's been audited has been required to repay everything in full, with interest and penalties. On the same day I received this letter from the CRA, I received a letter from ParkLane, reassuring me that the CRA isn't talking about their program, but rather the "re-valuation" schemes.
6. October, 2007 - I received a letter from CRA returning my documentation, and stating that they'd completed my review and found that no adjustment is necessary.

So where am I now? I have not yet received a "notice of reassessment", nor has this auditor contacted me, despite the letter 2 months ago indicating he/she would be contacting me "shortly." I still have my refund, sitting in a bank account, and I want to put it in my RRSP before the February deadline, but if I receive a Notice of Reassessment, I'll need access to the cash to repay it. I'm anxious for the case to be decided so I'll know whether or not we'll have to repay the money. :(


You may want to read Jonathan Chevreau's article today Gifting shelters, take note from The Financial Post.
Last August, in its annual alert to taxpayers, Canada Revenue Agency issued a warning that participation in gifting tax shelters was likely to result in a tax bill.

The CRA said it will audit "all" such arrangements. "Every audit completed to date has resulted in a reassessment of tax, plus interest," the CRA said, adding that in many cases it "has denied the 'gift' completely."

Parklane Financial Group is specifically mentioned in the article.
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Parklane Financial Woes

Postby bradanddeb » 25 Mar 2008 22:41

My husb and I always did use a CPA up until 2003. Then a friend recommended The Tax group and a real smart gal. Seemed to do a good job and knew her stuff and much less money. Then in 2004 tax season we were invited to take part in a Charitable Donation Scheme instead of throwing away our money into RSP's(like we usually did)
Get back over 1.57 for every charitable dollar you donate, etc. Tried and tested by Parklane Financial's top dog tax lawyers. All the partners at The Tax Group participated wholly in this program in prev. yrs. No comebacks from CRA.
Well, now we are being audited for 2004 and 2005 and wonder if anyone out there who has been audited prior to these years has heard anything about their Dispute yet-no one at Parklane or The Tax Group will answer our immediate question. Where is our original cash donation-give it back and we'll use it as a down payment to CRA while the Dispute raves on!
The Tax Group invited us in and prepared our returns, we were never really told that our orig cash donation would triple in size by the time the returns were filed. But we did go the second yr. after being assured this was still bombproof and still no comebacks from CRA.
Is there anyone out there who feels duped like we do? Anyone who has
engaged Counsel or professional advice? Love to hear from you.
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Re: Parklane Financial Woes

Postby brucecohen » 26 Mar 2008 07:45

bradanddeb wrote:Is there anyone out there who feels duped like we do? Anyone who has
engaged Counsel or professional advice? Love to hear from you.

Few, if any, FWF members participated in these schemes, so there has been little discussion of them here. You will find a lot of discussion -- and company -- at the Canadian Business forum. Here's one thread and I think there are several others.
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Re: Parklane Financial Woes

Postby parvus » 26 Mar 2008 19:01

bradanddeb wrote:My husb and I always did use a CPA up until 2003. Then a friend recommended The Tax group and a real smart gal. Seemed to do a good job and knew her stuff and much less money. Then in 2004 tax season we were invited to take part in a Charitable Donation Scheme instead of throwing away our money into RSP's(like we usually did)

It's unfortunate that this circumstance is the occasion for your first foray onto FWF.

But be careful about characterizing RSP contributions as "throwing away our money;" you're only getting the option to exercise the same tax benefit as do teachers, police officers and other folks who have company or state-sponsored pension plans.

Be careful, too about overhyped tax-savings. In general, the government accepts tax planning, looks askance at tax avoidance, and punishes taxe evasion seriously. Here's a Tim Cestnick article from 2004 about charitable tax donation shelters.

Best of luck in resolving the CRA issues.
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Postby WishingWealth » 26 Mar 2008 19:22

bruce:
Few, if any, FWF members participated in these schemes, so there has been little discussion of them here.


Perhaps because we (FWF) are a bunch of irascible people who smell the UCS 5 miles away. And then we start running, adding a few more miles of separation.

Just two weeks ago, a bunch of people in my area were caught in a scheme involving a free Caribbean vacation.
Just press 9 on the phone to claim your prize. :roll: :roll:

Enough are born every minute I guess.

But, you can have a good laugh if/when you see WW on W5 crying his eyes out 'cos he was separated from his hard earned $$ by a schemer who was smarter than WW is paranoid.

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Postby parvus » 26 Mar 2008 19:37

Lino Matteo? (Encore une fois dans La Presse, aujourd'hui.)
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Postby WishingWealth » 26 Mar 2008 19:54

Actually that scheme (pressing 9) simply involved the redirection of the call to a number where they charge an arm and a leg per minute of access.

Old scheme but it looks like it's still effective.

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Timeline of my events

Postby fakir » 21 Apr 2008 17:59

Here is my timeline to compare with Kombat's (Kombat - can you please PM me so we discuss this offline? Thanks):

Dates are not accurate.


1. Fall, 2006, made an $2500 donation to charity, applied to be admitted to this Trust, and signed papers directing them to donate my trust units to the same charity, if I'm admitted into the trust.
2. I was admitted into the trust, my units were given to the charity and redeemed for another $7500. I received 2 receipts: 1 for $2500 and 1 for $7500.
3. Spring, 2007 - Filed my 2006 taxes using UFILE, claimed the donations and a modest refund. Received my Notice of Assessment, and my refund for the full amount I claimed.
4. August, 2007 - Received a letter from the CRA indicating my participation in the ParkLane charities was being reviewed, and told me that I will receive another letter in the near future requesting supporting paperwork (no other details provided).
5. I did not receive anything more after that.

Notable differences:
1) no attempt was made to request paperwork (either that or the letter was lost).
2) no threat of audit was made.

Assumption:
1) I was small fry and not worth going after
2) CRA was selectively choosing only those who had donated large amounts because of time and resource constraints??

Nevertheless it's an interesting insight to how the CRA works. I always thought that all of these threats were computerized, but it makes sense that they can only audit as many as their auditors can handle.

Given anecdotes from other threads about the overloaded CRA from previous years, it stands to reason that it's possible that small fry like myself might slip under the radar.

Of course, the threat is enough for me to rethink my participation for this year, but I hope I won't have to repay back for 2006 and 2007. Or perhaps I will tempt fate by just donating $2500. (I donated $5000 in 2007 which may put me on the threshold of CRA's interest!).

I am in no way endorsing donating in such a way, the above is purely informational and it's already been indicated that most of you DO NOT and WILL NOT involve yourselves in these schemes.
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Re: Timeline of my events

Postby saylavbda » 22 Apr 2008 11:28

fakir wrote:Notable differences:
1) no attempt was made to request paperwork (either that or the letter was lost).
2) no threat of audit was made.

Assumption:
1) I was small fry and not worth going after
2) CRA was selectively choosing only those who had donated large amounts because of time and resource constraints??



Or they are currently in the courts challenging the schemes, if successful, they then go after everyone by simply denying the donation and demaning repayment of amounts plus interest. Its easier than auditing each person. The letter from CRA serves as notice that you return is being reviewed, I think this is a legal move so that you can't say they didn't tell you.
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Re: Timeline of my events

Postby marty123 » 22 Apr 2008 12:29

saylavbda wrote:Or they are currently in the courts challenging the schemes, if successful, they then go after everyone by simply denying the donation and demaning repayment of amounts plus interest. Its easier than auditing each person. The letter from CRA serves as notice that you return is being reviewed, I think this is a legal move so that you can't say they didn't tell you.


I believe that's correct. Failure by CRA to serve you notice within 3(?) years would mean you dodged the bullet. In this case, you've been put on notice within the appropriate period, and you'll be told how much to pay back once it has gone through the legal motions (including interest, penalties and I believe even the deduction received on the "more legitimate" $2,500). Based on CRA's success of previous years and previous programs, it's looking like a matter of routine before you have to settle. I'm pretty sure the Canadian Business threads quoted above explain that process (if you're able to sift through the shameless promotion and the promoters' misinformation).
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Postby Bylo Selhi » 02 Jun 2008 07:13

Way back in almost prehistoric times, The Wealthy Boomer wrote:Ah yes, the ones below the radar. Like Parklane, Equigenesis and Banyan Tree? As the CRA says, these all have Tax Shelter ID numbers so just how far below the radar are they? All have been named in the press before so it would be naive to believe the CRA is not as aware of them as the more heavily promoted ones mentioned in the articles.

Maybe the tax lawyers for these less visible ones have found genuine loopholes; maybe they haven't. But if the CRA clearly doesn't like any of these why wave a red flag in front of the bull's face?

Donors owe millions after revenue agency investigates foundation
A Toronto-based charitable foundation that gave out $208 million in tax receipts over the past six years was called a "sham" by the Canada Revenue Agency, tossing recipient charities into disarray and forcing donors to pay back close to $100 million to the government.

What's more, the Banyan Tree Foundation offered many of its clients loans to increase their donations, so donors are also on the hook for tens of millions in loans to a company now owned by Banyan Tree president Robert Thiessen.

In internal documents obtained by CBC News, the CRA claims no loans took place and no annuities were set up for the charities. It questions a $65-million donation to the University of the West Indies in Jamaica, and says that Banyan Tree was working with offshore entities not at arm's length from the foundation...

(See linked story for list of affected charitable organizations from coast to coast to coast.)
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Postby Bylo Selhi » 16 Aug 2008 10:10

No shelter from tax storm
This past week, the Canada Revenue Agency followed through on an earlier threat and revoked the charitable status of International Charity Association Network (ICAN)... Most of ICAN's revenue was derived through its involvement with the Global Learning Gifting Initiative tax shelter. In 2006, nearly 23,000 donors contributed to ICAN and its tax shelter...

ICAN's suspension comes one year after the CRA issued its most terse warning ever to Canadians last August, cautioning them to be wary of all tax-shelter-related arrangements, where donors end up with tax receipts worth more than the amount actually donated. The CRA plans to continue auditing "every participating charity, promoter and investor."
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Postby adrian2 » 20 Sep 2008 09:36

Toronto agency loses charity status

The federal government has revoked the charity status of the Banyan Tree Foundation, a controversial Toronto organization whose donation program left 3,000 donors on the hook for millions of dollars in back taxes.

The official notice said Banyan Tree's registration was rescinded under sections of the Income Tax Act which deal with organizations that issue improper or false gift receipts.

“The revocation of the registration is effective on the date of publication of this notice,” the Canada Gazette said.

Already, the Canada Revenue Agency has said in letters it sent to donors that it is disallowing $208-million worth of tax receipts, calling Banyan's donation setup “a sham.”

Since 2002, Banyan Tree president Robert Thiessen has promoted a gift program in which donors pledge only part of their donation and contract loans for the rest.

“It is our position that the program was a sham designed to make the appearance that there was a legitimate loan, donation, as well as a charitable use of the funds, when in fact none existed,” the CRA said in a letter sent this spring to people who donated for the fiscal year 2004.

Banyan's program enabled donors to claim larger tax credits than they actually had disbursed. Part of the donated cash was to be invested and the returns pledged to various charities.

“The loans were never funded,” the CRA said in its letter, adding that “Mr. Thiessen simply requested that the bank process circular paper accounting entries for the amount of the loans.”

The foundation used the cash portion of their donations “primarily to pay for fees to promote and administer the program,” the CRA letter said.
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Help! CRA Investigating My Charitable Donation!

Postby NEMESIS_2008 » 30 Nov 2008 19:52

Hello,

I am new here and this is my first post. I would like to kindly ask the experts here for some advice.

After reading this thread, it seems like I am in the same situation as some here: I got a letter in the mail from CRA reviewing my claim for donations in relation to the Global Learning Gifting Initiative 2006 Tax Shelter. A representative of this program told me to donate a sum of roughly $1500, and I would get a tax receipt for about $7000. I asked, is this legal? He said yes and showed me the website of the charity. Perhaps I was fooled into this because I did make the donation and for a receipt for $7000. Now the CRA is on my case and asking me for the receipt, proof of cash payment, etc.

Please help me deal with CRA. I'm not to familiar with these issues. I also donate to other charities too, such as World Vision and did not expect to get into this mess. Any advice will be greatly appreciated.

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Postby Yukon Maiden » 30 Nov 2008 21:13

To keep it short. You WILL end up having to pay back the taxes you thought you were getting around so you are better off paying them now. You WILL NOT get your $1500 back so you can take that as a lesson learned.
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Postby parvus » 07 Dec 2008 17:06

The latest from RevCan:
Warning: Canada Revenue Agency has denied over $2.5 billion in tax shelter gifting arrangement donations
Despite numerous warnings and audit actions by the Canada Revenue Agency (CRA), some taxpayers are still participating in tax shelter gifting schemes.

Statistics and facts

  • The CRA plans to audit all tax shelter gifting arrangements.
  • For audits completed to date, over 65,000 taxpayers who participated in these schemes have been reassessed, or are in the process of being reassessed.
  • In most cases the CRA has denied the “gift” completely.
  • Well over $2.5 billion in claimed donations are being denied.
  • In 2008, Canadian courts have continued to confirm the CRA’s position with respect to these schemes.
[snip]
Related news releases:

The Canada Revenue Agency revokes the charitable status of the Pinnacle Foundation (November 17, 2008)

The Canada Revenue Agency revokes the charitable status of the Choson Kallah Fund of Toronto (November 3, 2008)

The Canada Revenue Agency revokes the charitable status of The Banyan Tree Foundation (October 20, 2008)

The Canada Revenue Agency revokes the registered status of the Canadian Amateur Football Association (September 3, 2008)

The Canada Revenue Agency revokes the charitable status of International Charity Association Network (August 11, 2008)

CRA revokes charitable status of the Francis Jude Wilson Foundation (March 5, 2008)
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Parklane test case

Postby ziggurat » 23 Feb 2009 22:43

Can anyone give me any specific information about where this "Parklane Financial" group is at in court? I have heard that there is a test case in progress but I've had a tough time finding out any actual details.
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Parklane Test Case

Postby Parkie » 12 Mar 2009 08:18

The hearing was in January but like you I haven't heard anything yet. I'm not optimistic given past decisions in similar cases even though Parklance says their program was "different". The opinions given by the lawyers and accountants had so many disclaimers, I should have saw through that. I was greedy. I regret investing in this thing.
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Postby ziggurat » 02 Apr 2009 08:32

Well, we'll just have to see how this plays out. My wife and I were persuaded to try this program -- this is our first year -- and like you I wish I hadn't now. At least it appears that in the Parklane set-up the charities are actually receiving a significant amount of money, so it's not a complete fraud along the lines of the Banyan tree fiasco. At least I hope not.
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Postby MFlo » 15 Apr 2009 17:21

Can someone point out a situation where one could make a donation close to year end that would be "profitable" or advantageous in reducing tax? is it possible to come out ahead by giving. For example, give $5,000 save $6,000.
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Postby Serenity » 07 Jun 2009 08:29

I recently received the following letter from Equigenesis Corporation:

You are receiving this letter because you previously participated in one or more Sentinel Hill film tax shelter investment...

Earlier this year, we received a letter from CRA stating that our 2005 and 2006 Investment and Charitable Donation Programs had passed CRA audit, no reassessments would be issued and all income tax deductions and credits would be allowed.

This type of letter is rarely issued by CRA subsequent to an in-depth audit being performed on a tax shelter. Due to this very positive result, we are offering a new program for 2009 that will be very similarly structured to our 2005 and 2006 versions.


Equigenesis then goes on to claim that an initial outlay of $20,000 in their 2009 Charitable Program provides tax writeoffs of $115,000! I wonder how many naive or gullible folks will fall for this scheme and come to regret it. Why doesn't CRA just shut these outfits down rather than deal with the mess they create. Oh, yeah, the Sentinell Hill film partnership did provide the promised tax benefits but:
a) CRA did reassess the deductability of some of the writeoffs in the early years and I had to pony up another $7,000 to settle
b) The Sentinell Hill/CRA correspondence file is several inches thick
c) I will never, ever do this again!
Please note this is NOT a recommendation to participate in this or any other tax shelter scheme!
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