The Canada Revenue Agency is warning taxpayers away from gifting tax shelters, saying that participants can expect to be audited.

The CRA says that every year taxpayers participate in gifting arrangements that result in donation receipts worth three or four times the actual amount donated. The agency reports that it has denied over $4.5 billion in tax shelter gifting arrangement donations and reassessed over 130,000 taxpayers who have made donation claims through a gifting scheme.

For most claims, the CRA has denied the gift entirely, it says. “Decisions in recent court cases have concluded that the ‘donation’ made by the taxpayer was not a gift or, where it was a gift, the amount did not exceed the out-of-pocket cost to the taxpayer,” the CRA says.

The agency points out that tax shelter numbers are used for identification purposes only. “Just because a tax shelter has an identification number does not mean that donations made to it will result in tax benefits,” it explains.

The CRA advises taxpayers to get independent legal and tax advice from a tax professional who is not connected to an arrangement, or to the promoter. “Packages from promoters will often claim to have legal or tax opinions from a law firm. You may find that these opinions contain very general comments and do not provide unconditional support for the scheme. Ask to see the opinions, and have them reviewed by an independent professional,” it counsels.

IE