Canadians and Taxes - Tilted Forum Project Discussion Community

Merlocke · 07-06-2005, 08:36 PM

Howdy everyone.

Guess what - all those months of going to work since January, and now the money you make finally gets to go into your pocket.

On average Canadians spend about 47% of their income on Taxes. Scary thought eh? That means from January to May, none of that is yours.

Anyway, a few people have started asking about my tax saving strategies again, so I thought I'd start up a thread on questions so everyone can benefit at the same time.

Let's start with the basics. I show people a system on how to save money by donations to charity. We run a government compliant, secure and proven system with the potential to save the majority of your tax dollars. This outpaces the traditional RRSP system, but should not replace it and be used in conjunction with it.

Essentially, you can apply to become the beneficiary of a trust to receive valuable training courseware, which you can in turn keep to upgrade your own skills and get a higher paying job, or donate to charitable organizations that are willing to train others to help stimulate the economy.

You can witness some of the good we've done for the community via this link: http://canadiancharity.com/./CITY_CLIP.WMV

We also ask that you help donate with a cash donation as well in order to purchase computers to run the courseware, and add sustainability to these programs to assist the community. In turn, you are eligible to receive a significant cash advantage when it comes to your taxes.

Drop me a line here to start asking questions unless you'd rather PM me if your questions contain confidential private information. If you're looking for the tax advantages, don't just go blindly donating as there is a procedure to the system to remain compliant.

Yakk · 07-08-2005, 12:02 AM

The old thread on the subject had some discussion on the issue.

From that old thread, there is one link in particular I think is most interesting:
CRA on tax shelter donation agreements

Quote:

Fact Sheet

November 2004

Tax shelter donation arrangements

The Canada Revenue Agency (CRA) reminds investors that the proposed legislative changes announced by the Department of Finance on December 5, 2003, to limit the tax benefits of charitable donations made under tax shelter and other arrangements, are effective throughout the 2004 tax year.

Potential investors should be aware of the risks associated with participating in certain tax shelter donation arrangements, including gifting trust arrangements, leveraged cash donations, and buy-low, donate-high arrangements.

All tax shelter promoters are required by law to report all sales of their arrangements to the CRA.

The CRA will challenge any arrangement that does not comply with the Income Tax Act and will audit the tax returns of investors with respect to their participation in such an arrangement.

Recommendation

The CRA has previously issued alerts to investors about the risks associated with certain donation arrangements and advised investors to take a number of precautions to protect their interests. In addition to the comments in this Fact Sheet, and those in the attached November 2003 Fact Sheet (including the December Update), the CRA recommends that anyone considering participating in tax shelter donation arrangements obtain independent legal and tax advice.

Background

The CRA issued a Fact Sheet, in November 2003 warning investors about the risks associated with participating in certain tax shelter arrangements. An update to that Fact Sheet was issued in December 2003 to advise that the Department of Finance had announced proposed changes to the Income Tax Act, on December 5, 2003, to limit the tax benefits from these arrangements. While the Update referred to one type of arrangement as an example (the buy-low, donate-high arrangement), the proposed changes are applicable to all tax shelter donation arrangements.

Current promotions

The CRA is aware that some donation arrangements continue to be promoted. Two such arrangements are identified as gifting trust arrangements and leveraged cash donations. It is the CRA's position that the December 5, 2003 amendments apply to these arrangements and will reduce their associated tax benefits.

Gifting trust arrangements

In these arrangements, the investor becomes a beneficiary of a trust and receives property as a distribution from the trust. Often, but not always, the property has a lien attached. The investor then donates the property along with an amount of cash (to pay off the lien where applicable) to a registered charity and receives a donation receipt for the total of the cash and purported fair market value of the property. Typically, the total cash paid by the investor is about 30% of the amount on the donation receipt.

The December 5, 2003 amendments provide that the donation amount on which the tax credit is based will be reduced by any "advantage" that is in any way related to the gift. It is the CRA's position that the receipt of such property from the trust is such an advantage, and the donation amount will be reduced accordingly.

Leveraged cash donations

These arrangements involve an investor applying for and receiving a loan to facilitate a cash donation (comprising the investor's own funds and the proceeds from the loan) to a charity. Usually, the investor makes another cash payment to the promoter or another entity as an investment, and the investment will be used to repay the loan. Typically, the total cash paid by the investor is about 30% of the amount on the donation receipt.

As explained above, the December 5, 2003 amendments reduce the donation by the amount of any advantage. The definition of advantage for this purpose includes a limited-recourse debt in respect of the donation. A limited-recourse debt is broadly defined to include any unpaid amounts if there is a guarantee, security, or similar indemnity or covenant in respect of the debt. It is the CRA's position that debts incurred as part of a leveraged cash donation constitute limited-recourse debts if they are to be repaid under such arrangements structured as part of the donation arrangement. The donation amount will be reduced accordingly.

The subsection:

Quote:

Gifting trust arrangements

In these arrangements, the investor becomes a beneficiary of a trust and receives property as a distribution from the trust. Often, but not always, the property has a lien attached. The investor then donates the property along with an amount of cash (to pay off the lien where applicable) to a registered charity and receives a donation receipt for the total of the cash and purported fair market value of the property. Typically, the total cash paid by the investor is about 30% of the amount on the donation receipt.

The December 5, 2003 amendments provide that the donation amount on which the tax credit is based will be reduced by any "advantage" that is in any way related to the gift. It is the CRA's position that the receipt of such property from the trust is such an advantage, and the donation amount will be reduced accordingly.

seems to apply to the above tax shelter.

The fact sheet linked on that first page includes both this section:

Quote:

As of 6:00 p.m. (EST) December 5, 2003, the value of a tax receipt issued by a charity for gifts of property, will be limited to the donor's cost of the property where it is donated within three years of acquisition or acquired through a gifting arrangement.

and a number of others. Read it here.

note that the CRA does not claim that such arrangements are impossible. In fact:

Quote:

Tax Shelter Amendment

A tax shelter is defined in the Income Tax Act to include any property or gifting arrangement for which a promoter represents that an investor can claim deductions or credits which equal or exceed the cost of the property less certain benefits within a four year period. The amendment to include gifting arrangements was effective February 19, 2003. Any subsequent arrangements that promise that donation tax credits will exceed the cost will be tax shelters, and promoters must obtain a tax shelter number before selling them. Taxpayers will be denied tax benefits if they participate in tax shelter arrangements that do not have a tax shelter identification number.

A tax shelter number is used for identification purposes only. It enables the CCRA to identify all tax shelters and their investors but offers no guarantee that taxpayers will receive the proposed tax benefits. The CCRA reviews all tax shelters to ensure that the tax benefits being claimed meet the requirements of the Income Tax Act.

It is thus possible for the above to be a valid tax shelter, assuming the seller has a tax shelter number.

It appears you are selling a tax shelter. May I ask your tax shelter number, if that wouldn't be rude?

Lastly:

Quote:

The CCRA may ask taxpayers to support their claim with receipts, and may challenge transactions that have one or more of the following characteristics:

* the advertised arrangements promise to sell items (such as art, software, or pharmaceuticals) to taxpayers to be donated immediately to selected charities for tax receipts that are much higher than what the person paid;

* the appraiser is not acting independently of the promoters or sellers of the arrangement or the charities involved;

* the fair market value seems too high;

* where the arrangement involves a loan where it's unlikely the person has to repay the loan because the lender's recourse to collect is limited, or the provision to settle the loan is by way of something other than cash payment from the taxpayer.

Merlocke · 07-10-2005, 10:04 PM

Hello Yakk,

I'm familiar with this article, as it's actually the same one I brought up when approached with this system the first time.

Actually, it's information like this that strengthens the program as we can validly show that we have complied with all requested information, rules, and laws. If you have any other questions or concerns, feel free to post them here, or PM me directly if it's of a private nature.

Besides the information handed to me on my first year of participation, I contacted the appraisers, the charities, Chartered Accountants on the math behind the Tax Program, CCRA to validate the Tax Shelter Number, and Lawyer contacts that I knew on the basis of the interpretation of the tax act. Until I was completely satisfied - I didn't participate, and neither should you until you're certain that the due diligence has been performed.

-=-
be wary of advertisements for property like art, books, or software that are valued at many times their cost and promise substantial tax savings through charitable tax receipts—especially if you do not get to see the property, or the charity has been pre-selected for you;

In our system, the Canadian Charities Association is the charity that we respectfully request that you donate to, however you can choose to donate to any charity you wish. In regards to seeing the property, samples are made available for your inspection. Should you wish the courseware to be delivered directly to you first, this is also an option. However keep in mind should you elect to go this route, you would be responsible for any excess shipping charges as well.

-=-

consider requesting confirmation directly from the recipient charity, independent of the promoter, that it has agreed to receive the property and that it will exercise due diligence regarding the valuation of the property;

Canadian Charities Association can be contacted via the information from their website. http://www.canadiancharity.com/home.htm

Or for your convenience, I've posted their contact information below.

HEAD OFFICE
Canadian Charity Association
2444 Danforth Avenue
Toronto, Ontario M4C 1K9 Canada
Registered Charity Number 89317 5414 RR0001

Email : info@canadiancharity.com
or
donations@canadiancharity.com
Phone : 416-752-4357
To remember our number, just think:
7 days a week - 52 weeks a year - HELP
~ to give or to receive ~
FAX : 416-752-4222

-=-

pay close attention to statements or professional opinions in advertisements or other documents that explain the income tax consequences of the donation arrangement, especially any assumed facts (these opinions often describe potential problems and suggest that the taxpayer get independent legal advice);

In regards to this statement, we are the only company with the backing of a national law firm. Cassels Brock http://www.casselsbrock.com/ As a national law firm, their reputation is at stake for any client/case they choose to give a legal opinion on, and defend in court. Having said that, no other system out there currently has the backing of a nationally respected law firm.

-=-

ensure that the appraiser is a qualified and independent party who is not connected to the promoters or sellers of the donation arrangement (generally, membership in a professional association is a good indication of an appraiser's qualifications);

review the valuation or appraisal report before making the donation as the report should indicate the professional appraiser is knowledgeable about the property and the market activity at the time of the donation. Note that the CCRA is responsible for ensuring compliance with the Income Tax Act and is not required to accept a valuation prepared by the promoter or its appraiser;

Here is the contact information of the appraiser.

emc partners
2510 Nash Road
Bowmanville, Ontario
L1C 3K4
(905) 697-2249 (905) 697-9130 (Fax)

You can contact them directly in regard to membership affiliations to professional associations.

We have also hired the same Appraiser that the CRA uses to doubly ensure that the prices that we quote for Fair Market Value withstand in a court ruling should the program get challenged.

As another added security feature, the courseware is stored within warehouses in the U.S. and as such requires to pass the border and be claimed at fair market value by customs. As customs and the CRA are the same division of the government, we have their stamp of approval on the value of the courseware the moment it passes the border.

-=-

ensure the arrangement is registered as a tax shelter;

Our Tax Shelter number is:
TS - 070003
QAF - 501075 QC only

-=-

while advance income tax rulings are optional, determine if one was obtained by the promoter with respect to the particular donation arrangement and if so, obtain a copy and review it carefully;

The CRA does not give advanced tax rulings on anything that requires the valuation of Fair Market Value. Having said that - the CRA uses scare tactics into getting tax payers to believe that any such systems without advanced tax rulings as not trustworthy. However in their own words - again they will not give advanced tax rulings on FMV, leading prospective donors in a circle in an attempt to prolong the time a donor takes to make the choice to donate and scare them away from their rights as stated in the tax act. That was a fun month and a half of running in circles. It ended when they decided to get hire the CRA's in house appraiser to valide and confirm the numbers.

-=-

A tax shelter number is used for identification purposes only. It enables the CCRA to identify all tax shelters and their investors but offers no guarantee that taxpayers will receive the proposed tax benefits. The CCRA reviews all tax shelters to ensure that the tax benefits being claimed meet the requirements of the Income Tax Act.

Just having a Tax Shelter number does not entitle a system to be complete within the word and spirit of the law. However it is a part of the requirements to stay within the legal boundaries and as such, we are required to have one for this system.

The security of the program rests within the structure of the system. The trust, the donations to a real and functional charity, the balance of the equation to have the system self sustaining, a strong and favourable legal opinion from a respected law firm, and the integrity of the valuation for the Fair Market Value of the courseware.

-=-

The CCRA may ask taxpayers to support their claim with receipts, and may challenge transactions that have one or more of the following characteristics:

the advertised arrangements promise to sell items (such as art, software, or pharmaceuticals) to taxpayers to be donated immediately to selected charities for tax receipts that are much higher than what the person paid;

In this program, you are receiving the courseware as a beneficiary of a trust, and as such are not using the buy low and donate high method that was changed on Dec 06th, 2003. This is a free and clear gift with no requirements to donate at any specific charity, or at all for that matter. Some people do just keep the courseware for themselves.

-=-

the appraiser is not acting independently of the promoters or sellers of the arrangement or the charities involved;

We have hired 2 prominent and independent appraisers to do separate and confirming valuations of the courseware. Even going so far as to hire the very same appraiser as the CRA uses when they take individuals to court regarding cases where FMV is in question.

Again, in this case we also ship the items across the U.S. Border to ensure the value of the materials are again checked to maintain the integrity of the FMV.

-=-

the fair market value seems too high;

Remember those circles and scare tactics that I was referring to about the CRA? This is second time the issue of FMV has been brought up in the same article. The appraiser works for the CRA, and as such, the FMV is exactly that with no additions added. Confirmed by two seperate appraisers, alongside the actual sales of the product on the site from the people who created the courseware. InfoSource

-=-

where the arrangement involves a loan where it's unlikely the person has to repay the loan because the lender's recourse to collect is limited, or the provision to settle the loan is by way of something other than cash payment from the taxpayer.

There is no loan within this program, and again as such does not apply.

-=-

That should pretty much cover that entire article.
Similar systems with fewer safeguards have been challenged in the past, and have won in court. Even the not so honest art flippers were able to escape without a scratch.

This system is different because I have seen the benefit firsthand, and now am getting courseware donated to schools in my own area.

If you have further questions, please let me know.

07-06-2005, 08:36 PM	#1 (permalink)
Merlocke Location: Canada	Canadians and Taxes Howdy everyone. Guess what - all those months of going to work since January, and now the money you make finally gets to go into your pocket. On average Canadians spend about 47% of their income on Taxes. Scary thought eh? That means from January to May, none of that is yours. Anyway, a few people have started asking about my tax saving strategies again, so I thought I'd start up a thread on questions so everyone can benefit at the same time. Let's start with the basics. I show people a system on how to save money by donations to charity. We run a government compliant, secure and proven system with the potential to save the majority of your tax dollars. This outpaces the traditional RRSP system, but should not replace it and be used in conjunction with it. Essentially, you can apply to become the beneficiary of a trust to receive valuable training courseware, which you can in turn keep to upgrade your own skills and get a higher paying job, or donate to charitable organizations that are willing to train others to help stimulate the economy. You can witness some of the good we've done for the community via this link: http://canadiancharity.com/./CITY_CLIP.WMV We also ask that you help donate with a cash donation as well in order to purchase computers to run the courseware, and add sustainability to these programs to assist the community. In turn, you are eligible to receive a significant cash advantage when it comes to your taxes. Drop me a line here to start asking questions unless you'd rather PM me if your questions contain confidential private information. If you're looking for the tax advantages, don't just go blindly donating as there is a procedure to the system to remain compliant. __________________ -=[ Merlocke ]=-

07-10-2005, 10:04 PM	#3 (permalink)
Merlocke Location: Canada	Hello Yakk, I'm familiar with this article, as it's actually the same one I brought up when approached with this system the first time. Actually, it's information like this that strengthens the program as we can validly show that we have complied with all requested information, rules, and laws. If you have any other questions or concerns, feel free to post them here, or PM me directly if it's of a private nature. Besides the information handed to me on my first year of participation, I contacted the appraisers, the charities, Chartered Accountants on the math behind the Tax Program, CCRA to validate the Tax Shelter Number, and Lawyer contacts that I knew on the basis of the interpretation of the tax act. Until I was completely satisfied - I didn't participate, and neither should you until you're certain that the due diligence has been performed. -=- be wary of advertisements for property like art, books, or software that are valued at many times their cost and promise substantial tax savings through charitable tax receipts—especially if you do not get to see the property, or the charity has been pre-selected for you; In our system, the Canadian Charities Association is the charity that we respectfully request that you donate to, however you can choose to donate to any charity you wish. In regards to seeing the property, samples are made available for your inspection. Should you wish the courseware to be delivered directly to you first, this is also an option. However keep in mind should you elect to go this route, you would be responsible for any excess shipping charges as well. -=- consider requesting confirmation directly from the recipient charity, independent of the promoter, that it has agreed to receive the property and that it will exercise due diligence regarding the valuation of the property; Canadian Charities Association can be contacted via the information from their website. http://www.canadiancharity.com/home.htm Or for your convenience, I've posted their contact information below. HEAD OFFICE Canadian Charity Association 2444 Danforth Avenue Toronto, Ontario M4C 1K9 Canada Registered Charity Number 89317 5414 RR0001 Email : info@canadiancharity.com or donations@canadiancharity.com Phone : 416-752-4357 To remember our number, just think: 7 days a week - 52 weeks a year - HELP ~ to give or to receive ~ FAX : 416-752-4222 -=- pay close attention to statements or professional opinions in advertisements or other documents that explain the income tax consequences of the donation arrangement, especially any assumed facts (these opinions often describe potential problems and suggest that the taxpayer get independent legal advice); In regards to this statement, we are the only company with the backing of a national law firm. Cassels Brock http://www.casselsbrock.com/ As a national law firm, their reputation is at stake for any client/case they choose to give a legal opinion on, and defend in court. Having said that, no other system out there currently has the backing of a nationally respected law firm. -=- ensure that the appraiser is a qualified and independent party who is not connected to the promoters or sellers of the donation arrangement (generally, membership in a professional association is a good indication of an appraiser's qualifications); review the valuation or appraisal report before making the donation as the report should indicate the professional appraiser is knowledgeable about the property and the market activity at the time of the donation. Note that the CCRA is responsible for ensuring compliance with the Income Tax Act and is not required to accept a valuation prepared by the promoter or its appraiser; Here is the contact information of the appraiser. emc partners 2510 Nash Road Bowmanville, Ontario L1C 3K4 (905) 697-2249 (905) 697-9130 (Fax) You can contact them directly in regard to membership affiliations to professional associations. We have also hired the same Appraiser that the CRA uses to doubly ensure that the prices that we quote for Fair Market Value withstand in a court ruling should the program get challenged. As another added security feature, the courseware is stored within warehouses in the U.S. and as such requires to pass the border and be claimed at fair market value by customs. As customs and the CRA are the same division of the government, we have their stamp of approval on the value of the courseware the moment it passes the border. -=- ensure the arrangement is registered as a tax shelter; Our Tax Shelter number is: TS - 070003 QAF - 501075 QC only -=- while advance income tax rulings are optional, determine if one was obtained by the promoter with respect to the particular donation arrangement and if so, obtain a copy and review it carefully; The CRA does not give advanced tax rulings on anything that requires the valuation of Fair Market Value. Having said that - the CRA uses scare tactics into getting tax payers to believe that any such systems without advanced tax rulings as not trustworthy. However in their own words - again they will not give advanced tax rulings on FMV, leading prospective donors in a circle in an attempt to prolong the time a donor takes to make the choice to donate and scare them away from their rights as stated in the tax act. That was a fun month and a half of running in circles. It ended when they decided to get hire the CRA's in house appraiser to valide and confirm the numbers. -=- A tax shelter number is used for identification purposes only. It enables the CCRA to identify all tax shelters and their investors but offers no guarantee that taxpayers will receive the proposed tax benefits. The CCRA reviews all tax shelters to ensure that the tax benefits being claimed meet the requirements of the Income Tax Act. Just having a Tax Shelter number does not entitle a system to be complete within the word and spirit of the law. However it is a part of the requirements to stay within the legal boundaries and as such, we are required to have one for this system. The security of the program rests within the structure of the system. The trust, the donations to a real and functional charity, the balance of the equation to have the system self sustaining, a strong and favourable legal opinion from a respected law firm, and the integrity of the valuation for the Fair Market Value of the courseware. -=- The CCRA may ask taxpayers to support their claim with receipts, and may challenge transactions that have one or more of the following characteristics: the advertised arrangements promise to sell items (such as art, software, or pharmaceuticals) to taxpayers to be donated immediately to selected charities for tax receipts that are much higher than what the person paid; In this program, you are receiving the courseware as a beneficiary of a trust, and as such are not using the buy low and donate high method that was changed on Dec 06th, 2003. This is a free and clear gift with no requirements to donate at any specific charity, or at all for that matter. Some people do just keep the courseware for themselves. -=- the appraiser is not acting independently of the promoters or sellers of the arrangement or the charities involved; We have hired 2 prominent and independent appraisers to do separate and confirming valuations of the courseware. Even going so far as to hire the very same appraiser as the CRA uses when they take individuals to court regarding cases where FMV is in question. Again, in this case we also ship the items across the U.S. Border to ensure the value of the materials are again checked to maintain the integrity of the FMV. -=- the fair market value seems too high; Remember those circles and scare tactics that I was referring to about the CRA? This is second time the issue of FMV has been brought up in the same article. The appraiser works for the CRA, and as such, the FMV is exactly that with no additions added. Confirmed by two seperate appraisers, alongside the actual sales of the product on the site from the people who created the courseware. InfoSource -=- where the arrangement involves a loan where it's unlikely the person has to repay the loan because the lender's recourse to collect is limited, or the provision to settle the loan is by way of something other than cash payment from the taxpayer. There is no loan within this program, and again as such does not apply. -=- That should pretty much cover that entire article. Similar systems with fewer safeguards have been challenged in the past, and have won in court. Even the not so honest art flippers were able to escape without a scratch. This system is different because I have seen the benefit firsthand, and now am getting courseware donated to schools in my own area. If you have further questions, please let me know. __________________ -=[ Merlocke ]=-