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Originally Posted by Yakk
So, you give money to a charity. You get a tax reciept.
This charity then gives you something (drugs) in return for this money that is worth more than your gift. You then give the thing the charity gives you to the WHO. You get a tax reciept.
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You give to the charity - correct.
A different Charity gives you a gift as a beneficiary of a trust.
The first donation is a seperate transaction from the other ones.
The people who control the trust watch who gives to the initial charity.
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Originally Posted by Yakk
The initial quid-pro-quo gift transaction doesn't look like gifts, it looks like a sale. You aren't giving a gift to charity, you are buying the drugs in practice. The gifts look like a thinly veiled legal fiction that CCRA won't be amused by if they look at it.
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Since they're two seperate transactions - the CCRA has agreed that this is a functionally structured program within the boundaries of the tax act. They may elect to close it down in the future as they have before to others, but until they choose to do so, it is fair to use until the limit is hit. Tax shelters are limited in the amount that they are allowed to declare - which is how the government prevents excessive usage.
Furthermore - you cannot receive an advanced ruling on this system due to it's usage of Fair Market Value. Plus - for every method of Tax saving, the CCRA leaves an option to close the door in the future.
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Originally Posted by Yakk
Alternatively, you just got a large gift from a charity. This is income -- all gifts are income with very few exceptions. You then give it away and get a tax write off. But, you give away nothing that you didn't earn: the tax effects will be negative or null, not positive.
I am not a tax lawyer. But there isn't any such thing as a free lunch. We have a purchase hiding as a donation and/or a big chunk of undeclaried income.
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As a beneficiary of a trust - you receive the gift at fair market value. This does not count as income - similar to inheriting capital property from a will. If a relative had passed away and had passed on a vehicle that I didn't require - I could freely donate this and receive tax write offs.
Tax lawyers that have been doing systems like this for 20+ years designed this system to help the U.N. and provide tax benefits to Canadians. The regulations that you can only donate up to 75% of your gross income also prevents this system from being taken advantage of. It's not a free lunch forever, and it's not a unlimited money making machine either - just an option for tax reduction.
There are lots of other more well known methods to reduce taxable income. Limited Partnerships to reduce provincial taxes, RRSP loans, The Smith Manoeuvre (
http://www.smithman.net/contact.html) which banks have been using for years. (don't buy the book btw - just go to the bank and ask about it, a financial planner there can set something up for you for free, just be sure to choose a solid system with low, but consistent interest rate higher than your mortgage payments)
The systems come and go - and new ones tend to get a little skepticism until they're more widespread. The interest paid on RRSP loans used to be tax deductible for a few years. Again - not a free lunch, as it's regulated by the RRSP deduction limits. RRSPs themselves weren't used for years until the Tax Brackets were introduced. Do a little research, and you'll see that my statements are true. I just wanted to share a new method with folks here.
Pros and Cons:
Pros: You don't need an HLOC and equity to be able to use this system.
Pros: If you've got some friends in the Doctors without Borders program - you'll be giving them a hand.
Cons: Eventually CCRA will change the laws if someone corrupts a system so don't count on things like this for long term financial planning.
Cons: You do have to put up apx $3000 minimum in to use this system.
The TINSTAAFL rule holds true. But there is such a thing as a small coupon to give people a bit of a break.
Paying all of your taxes is a voluntary option. Even if you don't take my advice on this thread for the above, do yourself a favour and create a small home based business selling things on eBay for example - pay your family wages for helping you out, and save a little money by claiming your new home computer as a tax write off.
Cheers,
Merlocke