Canadian Revenue Agency Revokes Charitable Status for Foundation

The Vancouver Sun reports that the Canadian Revenue Agency (CRA) has revoked the charitable status of a foundation that participated in a tax shelter scheme. Here is the Sun’s description of what was going on (this description was taken from the foundation’s own web site – which strikes me as similar to putting a sign on your front door proclaiming “Illegal Tax Evasion Schemes Available Here”):

An unidentified Bahamian resident donates the right to use condominium units at the Regattas of Abaco, a resort in the Bahamas, to a Canadian trust called the Regattas Trust. The trust then identifies “suitable beneficiaries” to whom it donates the property. The beneficiary, however, must promise to repay a loan for $8,000. The beneficiary then donates the property to Pinnacle at its fair market value, which is said to be $26,560. This generates a tax refund of about $12,000 which, after repaying the $8,000 loan, leaves the donor with a $4,000 profit.

The CRA has targeted these charitable tax schemes, which almost invariably contain an offshore component and an “independent” appraisal generating a tax refund that exceeds the donor’s out-of-pocket costs, and the agency has announced it is reassessing thousands of taxpayers because of donations that have resulted in the issuance of hundreds of millions of dollars worth of tax receipts.

JDC