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Personal Income Tax -> Tax Shelter DonationsBeware of tax shelter donation arrangements, and gifts of propertyTaxpayers who participated in "buy-low, donate-high" donations can expect to be audited by Canada Revenue Agency (CRA). As of December 2010, over 135,000 taxpayers have been reassessed, and denied about $4.5 billion in donations claimed. For most claims, the "gift" has been entirely denied. Many organizations have had their charitable status revoked. See the CRA Tax Alert issued December 2010. Anyone wishing to participate in these types of arrangements should get independent professional tax advice, from someone not associated with the "arrangement". If you have been reassessed by CRA and owe them money, you can pay the tax bill to avoid racking up expensive interest charges. You can still appeal the assessment. If you win, you will get your tax money refunded with interest. For more information about appealing an assessment, see the CRA web page Complaints and Disputes. If a tax shelter donation arrangement has a tax shelter number, this does not mean that the tax shelter is approved by CRA. This number is for identification purposes only. Proposed changes to the Income Tax Act were to take effect at 6pm EST on December 5, 2003. The Bill containing these proposed revisions, Bill C-10 from 2007, has not received Royal Assent, and thus has not been enacted. However, the Department of Finance in 2011 indicated that this bill is not dead, and is expected to be reintroduced. The changes in proposed Income Tax Act s. 248(35) specify that where a donation is made by way of a gift of property, the allowable charitable donation amount will be limited to the taxpayer's cost of the property if the property was acquired under a "gifting arrangement" as referred to above. Thus, if the item donated was acquired by the taxpayer for $100, then $100 will be the maximum allowable charitable donation amount.
| For other non-cash donations, the allowable charitable donation amount will be limited to the taxpayer's cost of the property, if:
If the non-cash donation was made as a result of a taxpayer's death, then the donation is considered to be made at fair market value. | ||||||
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The above changes do not apply to donations of:
Only donations to registered charities can be claimed as charitable donations. CRA has a web page, Charities and Giving where you can search charities listings to see if a particular charity is a registered charity. See the article on the donations tax credit on our Filing Your Return page. Tax tip: If it seems too good to be true, you should probably avoid it!!!
Revised: February 03, 2012
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