Canadian Humanitarian Trust.

[Merlocke]

Hi Folks,

As per requested - I'm going to explain another Tax saving system.

Facts to keep in mind:
1) Ontario's Highest provincial Tax rating is around the 46.4% Tax level. (I'm using ONT b/c it seems that most readers in this forum are from there)

2) In accordance to the Tax act - you are allowed to donate and claim to a maximum of 75% of your gross annual income to charitable organizations.

=====================================

The simplified route for saving money through a tax system is what I will share with you for now

As an example - I'll give you an income of 100,000 in the province of Ontario.

At 100,000 - your maximum charitable donations as specified by the tax act - is at 75% of your gross annual wages. In this case - 75,000.

The system I will offer you is one through the Canadian Humanitarian Trust.

Essentially the architecture works as such.
1) Donor donates cash to Foundation A
2) Upon receipt of this donation - Foundation A presents the donor with a Tax receipt equal to the donation amount.

3) CHT (Canadian Humanitarian Trust) sees this donation and offers the donor the option to become a benefactor of the trust - provided they have shown the following:

a) A history of giving in the past.
b) Have donated a significant amount to Foundation A

4) Upon passing requirements to become a beneficiary - the donor receives a gift of pharmaceuticals from the Canadian Humanitarian Trust. The Donor is then given the choice to either keep these pharmaceuticals - or to donate them to the W.H.O. - World health organization. (you can take a guess that most people elect to donate)

5) The W.H.O. (World Health Organization) presents the donor with a tax receipt of the value of the goods given.

6) The donor then applies these two tax receipts to his/her income tax at the end of the year.

=====================================

using the sample numbers - it looks like this:
75,000 max. (it's ok to go over a little - you can use it as a carry over for up to 5 years)

Donate $20,720 to Foundation A - from which you will receive a tax receipt for the dollar value of your donation and the option to become a beneficiary of the Trust.

The Trust will grant you (70 units of WHO essential medicine units) based on your level of donation to Foundation A. Which in turn - you donate to the WHO. (This goes to the United Nations to assist 3rd world countries with medical supplies for deworming, and removing parasites)

The two tax receipts will net you a total of $78,120 in tax credits. In ONT - the provincial rate of tax at the highest percentage is 46.4%.

calculation:
78,120 * 0.464 = $36,247.68 <-- this is roughly your tax return. Not taking into consideration any deductions you use for RRSPs, or other deductions or additions to your income.

Essentially - it's a philantrophic, moral, ethical, and most importantly Legal method of redirecting your tax dollars to a worthy cause - while netting you some tax based incentives in return. I've been doing these systems for 2 years now, and have the backings of folks who have been doing it for over 20 years.

If you have any questions about any of the specifics - let me know and I will show you the section in the Tax act that explains it. If you'd like to participate - drop me a PM and I can have further information sent your way. If I cannot answer the question myself - I'll be sure to forward it to my district manager from whom I will obtain an answer from and relay it to you folks.

NOTE: the example I provided above is a MAXIMUM efficiency based model. By no means are you forced to participate at that level. The minimum amount (depending on date - but this is good until Sept 15th) is $2960. You can perform the same calculations on this number if you wish.

FYI provincial maximum tax rates for anyone that wants to apply this to their own numbers:

BC: 43.7
AB: 41.75
SASK: 44
MAN & ONT: 46.8
NS & PEI: 47.3
NFLD: 48.64

If you don't understand the system - let me know and I will crunch your numbers for you. Drop me a PM and I'll provide you with your own numbers.

If folks are located elsewhere - let me know as well - and I'll see if I can accomodate for you with one of my colleages in another province. (if possible - I can't make promises for everywhere except for BC, AB, MAN, and ONT)

[Merlocke]

To nip some of the questions in the bud for those that enjoy arguing:
Subsection 118.1(3) this time. The recent amendments to the Income Tax Act say that the charitable gifts had to be held for three years or the tax donation was equal to their ACB not the FMV.

These provisions should have no application in the case where the property, the WHO Essential Medicine Units, are aquired by the trust at an adjusted cost base equal to fair market value and the beneficiary in turn acquires the WHO Essential Medicine Units at the same amount. There is a deemed adjusted cost base in each case (i.e. to transfer to the trust and subsequently the taxpayer) equal to fair market value, under the Act, that ensures that fair market value is the same as the cost within the meaning of proposed subsection 248(35). Accordingly, the rule in subsection 248(37) directed at artificial increases in cost should not have negative consequences.

The structure is a

tax free rollover on the distribution from a Personal Trust to a Beneficiary under the Trust. And a donation of capital interest of the Beneficiary in the Trust to a Registered Charity, the value of which is determined by the ACB to the Trust of the Trust property, which becomes the ACB to the Beneficiary. The amendments to section 248 require the amount of any receipt for a gift in kind made within three years of acquiring the property which is the subject of the gift to be equal to the ACB of said property to the donor. The ACB of property distributed from a Trust is equal to the FMV of that property entering the Trust.

==========================================

Further facts:
The creators of this system have donated 100 million dollars worth of Pharmaceuticals to the United Nations last year, and have helped 13 countries.

Why this route? Simple.
Most of the medicines are used to help remove parasites - or deworming.
For all of the food drives that people do, if the medical issues aren't handled first, who do you suppose eats the food?

- the worm! It's important to help rid these people of the parasites as well as giving them food to eat. Without doing both - efforts are wasted.

Again if you're interested in helping out, drop me a PM.

[Merlocke]

So, nothing from grant or jovi on this one yet...
Anyone want to take a crack at it?

[ItzMe]

So, nothing from grant or jovi on this one yet...
Anyone want to take a crack at it?

Yeah...to anyone considering it - make sure you spend the bucks *now* on getting good advice from a professional tax lawyer ... (whether this shelter works or not is besides the point - anyone embarking on any such plan should always (imho) get good professional advice from people who deal with CCRA for a living!...)...could save you alot of heartache later in life especially if you need to defend yourself to CCRA ... (having a professional lawyer/accountant there is a definate + if things go sour...)

No comment on CHT itself etc as I'm not a professional taxation expert...! :) (but I do wonder why, if it is so easy to setup and so much money can be saved, why more people don't use it?)

Also, what's the impact of the AMT (Alternate Minimum Tax) on these shelters (is there any impact?)...would seem that if one is avoiding such a hefty amount of tax, AMT might come into play??...again I'm no tax expert... just asking as I go along here..! :)

[grant]

So, nothing from grant or jovi on this one yet...
Anyone want to take a crack at it?

Sure, i'll try translate this down to a level my intellect can understand:

1- you donate $20,000 to charity 'a'
2- organization 'b' gives you $58,000 worth of drugs for free
3- you donate the $58,000 worth of drugs to charity 'c'
4- you get tax receipts for $20,000 + $58,000 = $78,000
5- the receipts reduce your taxes payable by $36,000
6- you rake in $16,000 profit ($36,000 - $20,000)

is that right?

[Cough]

1- you give $20,000 to phoney charity 'a'
2- "someone" gives you $58,000 worth of drugs for free - so of course they are not worth anywhere near $58,000 (ps $58K is probably enough to deworm all of sub-saharan Africa since they are probably canine deworming pills)
3- you donate the worthless drugs to a real recipient, but probably someone else issues the phoney tax receipts - you get tax receipts for $20,000 + $58,000 = $78,000
5- the receipts reduce your calculated taxes payable by $36,000
6- you rake in $16,000 profit ($36,000 - $20,000) temporarily until CCRA comes knocking on your door
7- CCRA look up your arse hole for worms. If they find none, or if they find some, they ding you for $36,000 and you have already lost $20,000 so total loss is $56,000 plus maybe some penalties.

am I far out?:confused:

Edit: I did a search on Canadian Humanitarian Trust and came up with no hits. Since I see pgcanred lurking in this forum perhaps you can point me to some legitimate information on this wonderful charitable organization?

[Jovi]

GOOGLED
Your search - "Canadian Humanitarian Trust" - did not match any documents.

Can you give us any links.

[Cough]

Comeone pgcanred, you've had at least ten minutes to respond....

Currently Active Users Viewing this Thread: 4 (4 members and 0 guests)
Cough*, Asun, pgcanred

[pgcanred]

1- you give $20,000 to phoney charity 'a'
2- "someone" gives you $58,000 worth of drugs for free - so of course they are not worth anywhere near $58,000 (ps $58K is probably enough to deworm all of sub-saharan Africa since they are probably canine deworming pills)
3- you donate the worthless drugs to a real recipient, but probably someone else issues the phoney tax receipts - you get tax receipts for $20,000 + $58,000 = $78,000
5- the receipts reduce your calculated taxes payable by $36,000
6- you rake in $16,000 profit ($36,000 - $20,000) temporarily until CCRA comes knocking on your door
7- CCRA look up your arse hole for worms. If they find none, or if they find some, they ding you for $36,000 and you have already lost $20,000 so total loss is $56,000 plus maybe some penalties.

am I far out?:confused:

You're cynicism is a discredit to you Cough.

The medicines are all listed on the World Health Organization's essential medicines list. The CHT organization has arranged to buy the medicines at just above the cost of manufacture, yet the fair market value is the retail price of these medicines.

You are helping real people with real needs, and you are controlling your own tax bill. If you do not want to participate that is fine. Check into it. Get the info and then make a decision.

[bdckr]

1- you give $20,000 to phoney charity 'a'
2- "someone" gives you $58,000 worth of drugs for free - so of course they are not worth anywhere near $58,000 (ps $58K is probably enough to deworm all of sub-saharan Africa since they are probably canine deworming pills)
3- you donate the worthless drugs to a real recipient, but probably someone else issues the phoney tax receipts - you get tax receipts for $20,000 + $58,000 = $78,000
5- the receipts reduce your calculated taxes payable by $36,000
6- you rake in $16,000 profit ($36,000 - $20,000) temporarily until CCRA comes knocking on your door
7- CCRA look up your arse hole for worms. If they find none, or if they find some, they ding you for $36,000 and you have already lost $20,000 so total loss is $56,000 plus maybe some penalties.

am I far out?:confused:

Edit: I did a search on Canadian Humanitarian Trust and came up with no hits. Since I see pgcanred lurking in this forum perhaps you can point me to some legitimate information on this wonderful charitable organization?

That's pretty good.

Except for #7

You really shouldn't have gotten that $36,000 tax break in the first place, so as long as you don't spend it, you won't be out that. You'll have definitely lost the $20,000. And you'll also be out the penalty that CCRA charges you, a one time lump sum and interest on the amount owing, I believe. And I guess the costs of paying for an accountant every year after since you've flagged yourself for an audit next year by the CCRA.

Oh yeah, also the cost for deworming pills.

[Cough]

You're cynicism is a discredit to you Cough.

The medicines are all listed on the World Health Organization's essential medicines list. The CHT organization has arranged to buy the medicines at just above the cost of manufacture, yet the fair market value is the retail price of these medicines.

You are helping real people with real needs, and you are controlling your own tax bill. If you do not want to participate that is fine. Check into it. Get the info and then make a decision.

Actually I am proud of my healthy cynicism. I take very little at face value, especially when I have an uneasy feeling..........

You have said in this thread and in the other "tax avoidance" thread to "check it out". I repeat my request for you or Merlocke to please provide me with any links to CHT website or to WHO endorsement of CHT.

I am surprised that WHO cannot buy at discounted prices and instead have to pay full retail. Maybe they need RFD?

Based on everything I have read to date, I HAVE made my decision - I will not participate in such a marginal venture. I have kept out of this post until now, but have posted now to warn other "less cynical" folks on RFD who might be tempted to take a flier.

[pgcanred]

Actually I am proud of my healthy cynicism. I take very little at face value, especially when I have an uneasy feeling..........
Nobody is asking you to take anything at face value. But I see you are judging the program based on face value.

You have said in this thread and in the other "tax avoidance" thread to "check it out". I repeat my request for you or Merlocke to please provide me with any links to CHT website or to WHO endorsement of CHT.
No such website exists. After the announcement last December 5th regarding gifts in kind that stopped the program last year. The CHT is taking a much lower profile.

I am surprised that WHO cannot buy at discounted prices and instead have to pay full retail. Maybe they need RFD?
In Canadian tax law it is irrelevant what the WHO can buy the medicines for.

Based on everything I have read to date, I HAVE made my decision - I will not participate in such a marginal venture. I have kept out of this post until now, but have posted now to warn other "less cynical" folks on RFD who might be tempted to take a flier.
Fine. But you have made your decision without making a full investigation. I hope others do themselves a favour and look into the program more fully.

[Jovi]

Who values this medicine as $58k??
Anything to back the value up?

CRA will immediately question this amount and probably disallow it right off the bat.

And what are the fees payable for this scam?

[Rehan]

So when you guys find obscure, soon-to-be-plugged loopholes to get out of paying your fair share of tax, to whom does the burden get shiften? :|

[pgcanred]

Who values this medicine as $58k??
Anything to back the value up?

CRA will immediately question this amount and probably disallow it right off the bat.

And what are the fees payable for this scam?

I don't have the information package yet so I cannot say. The people at CHT were involved in a similar program last year so they have been through this before. There are no fees.

[crazyboie]

pgcanred & Merlocke have provided a lot of information and have rebutted grant & Cough & Jovi

..but my 'gut' instinct tells me that in the end this would be a bad decision...

don't wanna p*ss off the tax man...or even aggravate him for that matter ..

I don't care if CHT has a low profile...they should atleast have a web site with some information

Like I even went to the WHO's web site (http://www.who.int/en/) and there is nothing on CHT or the Canadian Humanitarian Trust ...

A sound investor always does his homework... kinda hard without the proper information .

A prospectus would be nice (Jovi has mentioned several times).

Merlocke, if you have some written pamphlets or something ( you should) there must be a web site referenced somewhere.. almost all documentation has an online counterpart...

maybe it's just me though!

[grant]

pgcanred & Merlocke have provided a lot of information and have rebutted grant & Cough & Jovi

1) neither pgcanred nor Merlocke has responded to MY nor JOVI's posts
2) our posts were requests for clarification, not arguments, and thus there is nothing to "rebut"

so please comprehend more closely before grouping us this way, thanks.

[pgcanred]

A prospectus would be nice (Jovi has mentioned several times).

Just ask Merlocke I am sure he would quite happily send an information package to you.

[pgcanred]

1) neither pgcanred nor Merlocke has responded to MY nor JOVI's posts
2) our posts were requests for clarification, not arguments, and thus there is nothing to "rebut"

so please comprehend more closely before grouping us this way, thanks.

Exactly which requests for clarification do you think that we have not responded to?

[Merlocke]

Yeah...to anyone considering it - make sure you spend the bucks *now* on getting good advice from a professional tax lawyer ... (whether this shelter works or not is besides the point - anyone embarking on any such plan should always (imho) get good professional advice from people who deal with CCRA for a living!...)...could save you alot of heartache later in life especially if you need to defend yourself to CCRA ... (having a professional lawyer/accountant there is a definate + if things go sour...)

No comment on CHT itself etc as I'm not a professional taxation expert...! :) (but I do wonder why, if it is so easy to setup and so much money can be saved, why more people don't use it?)

Also, what's the impact of the AMT (Alternate Minimum Tax) on these shelters (is there any impact?)...would seem that if one is avoiding such a hefty amount of tax, AMT might come into play??...again I'm no tax expert... just asking as I go along here..! :)

As requested - I have obtained professional advice from the Canadian Law firm of Gardiner Roberts LLP. AMT does not come into play as the limitations of charitable donations prevent you from reaching the AMT level.

Thanks for asking.

[ItzMe]

As requested - I have obtained professional advice from the Canadian Law firm of Gardiner Roberts LLP. AMT does not come into play as the limitations of charitable donations prevent you from reaching the AMT level.

Thanks for asking.

Interesting...again I'm not knowledgable on Tax law so I won't comment :)...

Again I'd recommend any RFDer who is thinking about this to obtain independent legal and financial advice from relavent persons (ie a tax lawyer, accountant, etc...) remember it's your a$$ on the line come tax time ... a full blown audit along with penalties can put you out in a bad way...

[Jovi]

As requested - I have obtained professional advice from the Canadian Law firm of Gardiner Roberts LLP. AMT does not come into play as the limitations of charitable donations prevent you from reaching the AMT level.

Thanks for asking.

Oh gee GR LLP says its ok, must be fine then.

Can you give us a web site, number, opinion paper from this law firm?

[pgcanred]

I had thought there was a statement from the CRA stating that charitable donations would not trigger the alternative minimum tax, but so far I have not been able to find anything to that affect on the CRA website. I would point out that the form for calculating the AMT does not ask you to enter your charitable donations. This form is found here AMT Calculation Form (http://www.cra-arc.gc.ca/E/pbg/tf/t691/t691-03e.pdf).

A brief comment by Arthur Drache The Tax Treatment of Charitable Donations (http://www.canadian-charities.com/ltax.htm) seems to indicate that charitable donations are deductible for higher income Canadians subject to the AMT. So I would suggest by implication they are not going to trigger the requirement for AMT.

Googling turned up a couple of older documents that supported this. Such as this Money Sense (http://tools.moneysense.ca/eng/smallbiz/taxes/showcontent.jsp?cid=100058).

Its the kind of question that may be difficult to find a definitive statement on as you are more likely to find documents saying what does affect AMT rather than what doesn't.

From my own experience I claimed over the $40,000 threshhold in 2003 (not all through a tax shelter like this) and it was allowed without any AMT implications nor even a question from the CRA.

[pgcanred]

Interesting...again I'm not knowledgable on Tax law so I won't comment :)...

Again I'd recommend any RFDer who is thinking about this to obtain independent legal and financial advice from relavent persons (ie a tax lawyer, accountant, etc...) remember it's your a$$ on the line come tax time ... a full blown audit along with penalties can put you out in a bad way...

You are absolutely right ItzMe everyone should do their own due diligence. Programs like this must have a Tax Shelter ID issued by the CRA and your charitable receipt(s) will have the ID on it. This number is purely administrative and identifies the arrangement used to the CRA. So all participants stand or fall together. I haven't seen their documentation yet but I am confident that CHT has a fund set aside to defend the program should the CRA chose to contest it. So no participant is left out on their own dealing with the CRA. Should it all go south the likeliest event is a re-assessment rather than a full-blown audit and penalties (unless you are doing something like not declaring income).

[Merlocke]

Sure, i'll try translate this down to a level my intellect can understand:

1- you donate $20,000 to charity 'a'
2- organization 'b' gives you $58,000 worth of drugs for free
3- you donate the $58,000 worth of drugs to charity 'c'
4- you get tax receipts for $20,000 + $58,000 = $78,000
5- the receipts reduce your taxes payable by $36,000
6- you rake in $16,000 profit ($36,000 - $20,000)

is that right?

Grant, don't get me wrong - I appreciate your speculative nature. It's why I post things like this - to get people's opinions on what they think are weak points in the system. Essentially - this simplified system is correct.

[Merlocke]

1- you give $20,000 to phoney charity 'a'


If you're going to give feedback - at least be respectful about it.
It can't be a phony charity - because then it would be considered Tax Evasion. Tax avoidance is legal, legitimate, and is the responsibility of the Tax payer to research on methods how to accomplish it. Tax Evasion on the other hand is illegal. Having a fake charity is Fraud - killing the system from the start. Charities are assessed by the CCRA and have requirements they must meet to be eligible to hand out Tax receipts. Without this fundamental step - I wouldn't bother going any further.


2- "someone" gives you $58,000 worth of drugs for free - so of course they are not worth anywhere near $58,000 (ps $58K is probably enough to deworm all of sub-saharan Africa since they are probably canine deworming pills)


The drugs are valued at 58,000 using the same pricing and same materials that the province of Ontario uses for their own medical practices. Again - I appreciate criticism, but please have the decency to read my articles before arguing a moot point.


3- you donate the worthless drugs to a real recipient, but probably someone else issues the phoney tax receipts - you get tax receipts for $20,000 + $58,000 = $78,000


1) The U.N. wouldn't accept worthless drugs.
2) Again with the phoney tax receipts...
3) Learn how to count... (your next step)


5- the receipts reduce your calculated taxes payable by $36,000
[/QUOTE=Cough]

Correct.

[QUOTE=Cough]
6- you rake in $16,000 profit ($36,000 - $20,000) temporarily until CCRA comes knocking on your door
7- CCRA look up your arse hole for worms. If they find none, or if they find some, they ding you for $36,000 and you have already lost $20,000 so total loss is $56,000 plus maybe some penalties.


The only possible weakness from my point of view is the calculation of the FMV of the Pharmaceuticals. The Income Tax Act is the one that actually raises the value to this amount. We are abiding by the Tax Act - which the CCRA wrote. We have a legal opinion from another large law firm - and even confirmation from the CCRA that this architecture is within the current laws.


am I far out?:confused:

Edit: I did a search on Canadian Humanitarian Trust and came up with no hits. Since I see pgcanred lurking in this forum perhaps you can point me to some legitimate information on this wonderful charitable organization?

They do not have a website.
People ask why? - simple - they're a charity and their focus is to give to the nations in need. Instead of spending money on Bandwidth on a flashy site, they're giving the money in the form of a product that other countries require. So they choose to spend their money through what's appropriate.

Don't give me the whole BS scenario about how cheap it is for a website - perhaps if you approach them with a donation of some web space and a webmaster that can make a decent site they might take you up on it.

[bobaroo]

if you receive a gift valued at $58,000 , don't you have to declare it as income, and thus pay income taxes on it? and then giving it away will only nullify the income tax paid, with a tax credit of the same value... leaving a net transaction of zero.

[Merlocke]

GOOGLED
Your search - "Canadian Humanitarian Trust" - did not match any documents.

Can you give us any links.

I apologize as there are no links - however I can have information sent to you if you are honestly going to give serious feedback. Take the information to your accountant, or to another tax lawyer if need be.

PM me with your address and I can have a package sent to you from the head ofice.

[Merlocke]

Actually I am proud of my healthy cynicism. I take very little at face value, especially when I have an uneasy feeling..........

You have said in this thread and in the other "tax avoidance" thread to "check it out". I repeat my request for you or Merlocke to please provide me with any links to CHT website or to WHO endorsement of CHT.

I am surprised that WHO cannot buy at discounted prices and instead have to pay full retail. Maybe they need RFD?

Based on everything I have read to date, I HAVE made my decision - I will not participate in such a marginal venture. I have kept out of this post until now, but have posted now to warn other "less cynical" folks on RFD who might be tempted to take a flier.

Same offer goes out to you - no site - but I can have head office send you information. All I request is respectful discussion between us regarding the weaknesses of the system.

I can be just as cynical, but I can't break it myself. You know how the saying goes... if you can't beat em - join em. I've had some high level accountants and some senior tax lawyers look into this. (non affiliated with CHT) That to me is my level of due dilligence.

[Merlocke]

if you receive a gift valued at $58,000 , don't you have to declare it as income, and thus pay income taxes on it? and then giving it away will only nullify the income tax paid, with a tax credit of the same value... leaving a net transaction of zero.

Almost right bobaroo.

Trusts are constructed in a much similar method to a will.

When someone passes away - and their will is executed, any items entering into the will enter in at FMV. Anything that exits the will leaves at FMV as well - and is not taxed.

If I were to inherit an item - and decide to give it away to a charity, it is essentially the same structure.

This is an excellent argument as the law that was proposed last year on Dec 5th changes the buy low donate high scenarios by changing the value of a gift in kind to the accrued base value of the gift. However the Income Tax Act raises the item to the FMV based on the trust structure. It was my favourite argument until I looked up the item in the tax act. It does raise the value to FMV via exiting a trust.

Keep them coming. I appreciate the feedback.

[Merlocke]

Who values this medicine as $58k??
Anything to back the value up?

CRA will immediately question this amount and probably disallow it right off the bat.

And what are the fees payable for this scam?


The province of Ontario values the medicine at $58k.
The pricing was derived from the wholesale (not even retail - which is officially FMV) cost of the pharmaceuticals that are purchased from the 2 largest distributors in Canada.

That was one of my good arguments too until it got shot down with that statement. If you like I can see if I can find the price list again.

pg is right - there are no fees for excercising this system.

[Merlocke]

pgcanred & Merlocke have provided a lot of information and have rebutted grant & Cough & Jovi

..but my 'gut' instinct tells me that in the end this would be a bad decision...

don't wanna p*ss off the tax man...or even aggravate him for that matter ..

I don't care if CHT has a low profile...they should atleast have a web site with some information

Like I even went to the WHO's web site (http://www.who.int/en/) and there is nothing on CHT or the Canadian Humanitarian Trust ...

A sound investor always does his homework... kinda hard without the proper information .

A prospectus would be nice (Jovi has mentioned several times).

Merlocke, if you have some written pamphlets or something ( you should) there must be a web site referenced somewhere.. almost all documentation has an online counterpart...

maybe it's just me though!

I can have a package sent your way - PM with your address and I will have head office send one your way. If you can break the architecure in any way - please share with the others - it's one of the main reasons I post here.

I took my swing at it - and couldn't beat it.

[Jovi]

if you receive a gift valued at $58,000 , don't you have to declare it as income, and thus pay income taxes on it? and then giving it away will only nullify the income tax paid, with a tax credit of the same value... leaving a net transaction of zero.


Bingo, I was thinking about that also, why would CHT just decide to give you $58k in drugs, why don't they just donate it straight to charity.
Som charities will match your contribution, but in this case its zero.
I suspects that this $58k is a sham.

BTW, what is the list of drugs worth $58k?

[Jovi]

Merlocke and Pgcanred

Why don't you post your names and addresses so we can contact you.

Also we can forward that infor to CRA to audit your returns :lol:

[Jovi]

Almost right bobaroo.

Trusts are constructed in a much similar method to a will.

When someone passes away - and their will is executed, any items entering into the will enter in at FMV. Anything that exits the will leaves at FMV as well - and is not taxed.

If I were to inherit an item - and decide to give it away to a charity, it is essentially the same structure.

This is an excellent argument as the law that was proposed last year on Dec 5th changes the buy low donate high scenarios by changing the value of a gift in kind to the accrued base value of the gift. However the Income Tax Act raises the item to the FMV based on the trust structure. It was my favourite argument until I looked up the item in the tax act. It does raise the value to FMV via exiting a trust.

Keep them coming. I appreciate the feedback.

Can you provide us with an IC or IT from CRA attesting to your above statement? :razz:

[Rehan]

Should it all go south the likeliest event is a re-assessment rather than a full-blown audit and penalties (unless you are doing something like not declaring income).
According to a CCRA source quoted in a Nov 22, 2003 National Post article (by Jon Chevreau), 5000 people were being re-assessed on these kinds of schemes and 5000 people were being audited.

So the chance of an audit is higher than you may think.

[pgcanred]

According to a CCRA source quoted in a Nov 22, 2003 National Post article (by Jon Chevreau), 5000 people were being re-assessed on these kinds of schemes and 5000 people were being audited.

So the chance of an audit is higher than you may think.

Yes Chevreau's article was somewhat damaging but also misleading. His article was somewhat hastily written and poorly researched. For example, he referenced an article by Arthur Drache which had nothing to do with the subject. Mr Drache's article was about a law that allowed you to claim a donation when you donated something with a debt upon it, eg a house. So youd woule be able to clain the equity as a charitable donation. The 5000 figure is somewhat misleading. A good number of these people were involved in art type transactions and my understanding was that the CRA sought to settle out of court (tantamount to an admission of defeat).

No CGI transaction was challenged last year which I believe Chevreau referred to, and as far as I know no Banyan Tree transaction was challenged last year. Remember they just have to challenge one and win, and all transactions would then be reversed. So if they only had to challenge one why didn't they do it? If the transaction itself was suspect why did the goverment change the law on Dec 5th 2003, or I should say propose changes to the law and state that the changed would be effective on Dec 5th?

Re-assessment in and of itself means nothing. It is only if the re-assessment stands up in court that you will lose out. CHT has a $500,000 defence fund to challenge any re-assessment. That is more than enough to fight the initial court case and launch an appeal if they lose the first.

If you read the CRA bulletin's they always release something towards the end of the year to try and frighten people out of doing something like this. No there were programs out there that they should have been frightened out of such as time-share and computer software donations. But in this case there is real assisstance with WHO essential medicines going to people who need them.

[bdckr]

Yes Chevreau's article was somewhat damaging but also misleading. His article was somewhat hastily written and poorly researched. For example, he referenced an article by Arthur Drache which had nothing to do with the subject. Mr Drache's article was about a law that allowed you to claim a donation when you donated something with a debt upon it, eg a house. So youd woule be able to clain the equity as a charitable donation. The 5000 figure is somewhat misleading. A good number of these people were involved in art type transactions and my understanding was that the CRA sought to settle out of court (tantamount to an admission of defeat).Well actually it doesn't. It could mean that the cost to take a case to trial is more than the amount they could recover.

No CGI transaction was challenged last year which I believe Chevreau referred to, and as far as I know no Banyan Tree transaction was challenged last year. Remember they just have to challenge one and win, and all transactions would then be reversed. So if they only had to challenge one why didn't they do it? If the transaction itself was suspect why did the goverment change the law on Dec 5th 2003, or I should say propose changes to the law and state that the changed would be effective on Dec 5th?That may be a function of manpower. It may be that they haven't gotten around to it yet. Don't forget that everyone is asked to keep their tax return info for a number of years (can't remember how many, 5 or 7?) because the government can go back that far to recover money from tax evaders.

Re-assessment in and of itself means nothing. It is only if the re-assessment stands up in court that you will lose out. CHT has a $500,000 defence fund to challenge any re-assessment. That is more than enough to fight the initial court case and launch an appeal if they lose the first.Based on...?
That might be enough to defend a handful of clients. If the company is big enough and has enough people participating, then after that money runs out...
I guess you should hope you're one of the first few people needing help from that fund.
If you read the CRA bulletin's they always release something towards the end of the year to try and frighten people out of doing something like this. No there were programs out there that they should have been frightened out of such as time-share and computer software donations. But in this case there is real assisstance with WHO essential medicines going to people who need them.So aside from the obvious cosmetic differences (drugs instead of art or software or whatever), how is this any different?

[bdckr]

The province of Ontario values the medicine at $58k.
The pricing was derived from the wholesale (not even retail - which is officially FMV) cost of the pharmaceuticals that are purchased from the 2 largest distributors in Canada.

That was one of my good arguments too until it got shot down with that statement. If you like I can see if I can find the price list again.

pg is right - there are no fees for excercising this system.
BTW, what is the list of drugs worth $58k?

I would like to know, too. What are the drugs?

Sample list of $58,000 worth of drugs that would be passed along?

edit:I can have a package sent your way - PM with your address and I will have head office send one your way. If you can break the architecure in any way - please share with the others - it's one of the main reasons I post here.

I took my swing at it - and couldn't beat it.

So why not just post it or a link here? In the interests of transparency and all?

[Rehan]

I don't know which drug CHT is working with, but here's some information from a Toronto Star article from Dec 4, 2003:

An extreme example of the difference between the value of the tax receipt and the price of the actual drug is mebendazole, a key drug used for treating parasitic worms in humans.

The chewable pill is a generic version of a drug first patented by a division of Johnson & Johnson Ltd. of New Jersey. The highest price permitted under the Ontario Drug Benefit Formulary is $3,203 for 1,000 pills, according to Ministry of Health spokesperson John Letherby.

Charities lined up by Bellam will issue receipts based on the formulary prices where they are available. But his company will charge prospective donors only 17 per cent of those prices, or $545 for 1,000 tablets in the case of mebendazole.

Bellam's supplier, Andrew Koval of MedPharm LLC in Washington, D.C., said his joint-venture factory in the Netherlands can supply fresh stocks of mint-flavoured tablets that meet European standards of quality for less than $15 (U.S.) [per thousand].

(A very quick Google search shows that you can even find them online for US$36 per thousand pills.)

If someone has $3203 to donate towards helping people in the 3rd world and their purpose is to help the donors rather than helping themselves, what would be the humanitarian/moral/ethical thing to do -- donate 165,000 of them (US$15 per 1000) or donate 1000 ($3203 per 1000)?

[grant]

Exactly which requests for clarification do you think that we have not responded to?

My post, dated Sep 8th, 2004, 06:47 PM, and jovi's post, dated Sep 8th, 2004, 07:27 PM, had not been responded to when you asked this question.

They have now. answers: "grant: correct" "jovi: no info available on internet".

[grant]

if you receive a gift valued at $58,000 , don't you have to declare it as income, and thus pay income taxes on it? and then giving it away will only nullify the income tax paid, with a tax credit of the same value... leaving a net transaction of zero.

The real answer: Gifts are not taxable income in Canada.

That's the whole point of this complicated dance- to make it look like you "donated" $20,000, and were "gifted" $58,000 in pills... when we all know, in truth, you just bought pills supposedly worth $58,000, for $20,000. (36,000 pills @ $545/1000). According to rehan, they would only cost you $750 if you bought them off the internet (36,000 x $15/1000 x 1.35).

But of course, if you actually "buy" pills for $750, and give them away, you can't claim $58,000 + $20,000 in charitable deductions...

You don't really think anyone gets into this because they want to HELP people do you?? It's just a pleasant side effect of cutting their taxes...

[pgcanred]

I don't know which drug CHT is working with, but here's some information from a Toronto Star article from Dec 4, 2003:



(A very quick Google search shows that you can even find them online for US$36 per thousand pills.)

If someone has $3203 to donate towards helping people in the 3rd world and their purpose is to help the donors rather than helping themselves, what would be the humanitarian/moral/ethical thing to do -- donate 165,000 of them (US$15 per 1000) or donate 1000 ($3203 per 1000)?

Could you post the link to $36 per 1000 out of interest? I clicked on some links from Google and most places where $20-$36 for 6 pills, and this place (http://www.mynetmeds.com/Lomper.htm) was $8 for 6.

The method they are using to appraise the fair market value of the pharmaceuticals is legitimate and has been evaluated by the Canadian Association for Pharmacy Distribution Management. A letter from the CAPDM is included in the package.

The contrast is not between some pills and more pills, but some pills and no pills sadly. The ultimate aim of the people at CGI was to reduce the profit that the tax payer would make, but they had to be competitve with other shelters. Today with the govenment clamping down on gifts in kind they probably had to make the profit attractive to encourage people to participate.

[pgcanred]

You don't really think anyone gets into this because they want to HELP people do you?? It's just a pleasant side effect of cutting their taxes...

No I don't think the primary motive is to help people. No one ever said that it was. The initial post from Merlocke was titled "Canadian Tax Savings Program".

You could do this and gift the tax refund to the national debt. You would probably help more people than simply giving the dollars. You could keep enough of the refund to cover your initial outlay and gift the rest to the national debt or your favourite cause.

[pgcanred]

Well actually it doesn't. It could mean that the cost to take a case to trial is more than the amount they could recover.
In the world of private individuals or corporations you are right. But since when has a government agency been worried about the return on cost of one court case? Especially when significant victories well publicised would stop others from participating in these programs. I stand by my original statement.

That may be a function of manpower. It may be that they haven't gotten around to it yet. Don't forget that everyone is asked to keep their tax return info for a number of years (can't remember how many, 5 or 7?) because the government can go back that far to recover money from tax evaders.
A valid point. I think it is 7 years. However they only need one test case and all returns using the same tax shelter ID would also have lost as well.

Based on...?
That might be enough to defend a handful of clients. If the company is big enough and has enough people participating, then after that money runs out...
I guess you should hope you're one of the first few people needing help from that fund.
Based upon last years estimate to defend a case like this was $120,000, and the estimate for an appeal $60,000. I assume it has gone up this year but not by too much. As mentioned above the CRA would only have to pick one test case and the same ruling would apply to all particpants who used the same tax shelter ID.

So aside from the obvious cosmetic differences (drugs instead of art or software or whatever), how is this any different?
Its a little more than a cosmetic difference. These are real drugs that real people need. How many lives would an old copy of MS Office save, or a timeshare in Collingwood? Thats not a cosmetic difference. Apart from the fact that the value of software and timeshares are kind of hard to appraise and not always easy for a charity to liquidate.

Sample list of $58,000 worth of drugs that would be passed along?
Sorry bdckr I just noticed you had this question in another post. I do not have a sample list for a specific valuation. But included in the package are lists of the drugs supplied. Which drugs will be used as a result of an individuals donation will depend upon the charties' needs at the time.

[Jovi]

The whole thing the courts and CRA look at if the taxpayer is trying to avoid taxes.
Unless as I said before you can hire high price lawyers this little scheme will be disallowed.

You donate 20K and get a 58K benefit - sorry don't think so.

[Rehan]

Could you post the link to $36 per 1000 out of interest? I clicked on some links from Google and most places where $20-$36 for 6 pills, and this place (http://www.mynetmeds.com/Lomper.htm) was $8 for 6.
Sorry, I had misread what I saw earlier.

But have no fear... :D Here (http://www.petrone.it/cgi-bin/gen/main.cgi?str=&mode=&stq=250), they're listed at €2.31 for 500 units of 100mg tablets or €10.5 for 500 units of 500mg tablets. Same ball park as that $36 per 1000 price I thought I saw.


The contrast is not between some pills and more pills, but some pills and no pills sadly.
Yes, unfortunately that's true. But I wanted to point out the numbers to highlight the absurdity of Merlocke's comment that "Essentially - it's a philantrophic, moral, ethical, and most importantly Legal method ..."

[pgcanred]

The whole thing the courts and CRA look at if the taxpayer is trying to avoid taxes.
Unless as I said before you can hire high price lawyers this little scheme will be disallowed.

You donate 20K and get a 58K benefit - sorry don't think so.
From the mouths of the CRA themselves Technical News No. 22 (http://www.cra-arc.gc.ca/E/pub/tp/itnews-22/itnews-22-e.html#P36_1315)

Response 7
Others areas where the GAAR has been found not to apply include:

In-house loss utilization (generally these arrangements are not considered a misuse or abuse, but I highly recommend that you obtain an advance tax ruling);
Estate freezes;
Foreign property;
Donation tax credits; and


The possibility of making profitable gifts is established in Canadian law. read up on Friedberg. He bought a textile collection for $12,000, donated it to the ROM, and received a tax receipt for $229,000.

[Jovi]

From the mouths of the CRA themselves Technical News No. 22 (http://www.cra-arc.gc.ca/E/pub/tp/itnews-22/itnews-22-e.html#P36_1315)

Response 7
Others areas where the GAAR has been found not to apply include:

In-house loss utilization (generally these arrangements are not considered a misuse or abuse, but I highly recommend that you obtain an advance tax ruling);
Estate freezes;
Foreign property;
Donation tax credits; and


The possibility of making profitable gifts is established in Canadian law. read up on Friedberg. He bought a textile collection for $12,000, donated it to the ROM, and received a tax receipt for $229,000.


What we are saying and you can't seem to get it is that you are getting $58k worth of benefit for $20k.
That benefit is taxable as income - plain and simple.

A better way would be to buy the pills for the lower cost - say $1000 and donate them for $10k. You are not getting a benefit from a third party.

[Jovi]

What we are saying and you can't seem to get it is that you are getting $58k worth of benefit for $20k.
That benefit is taxable as income - plain and simple.

A better way would be to buy the pills for the lower cost - say $1000 and donate them for $10k. You are not getting a benefit from a third party.

Well doing that way - these shady companies don't benefit.
Maybe I will do that myself - excluding the shisters and shills.

Thanks for the tip.

[bobaroo]

Originally Posted by Jovi
What we are saying and you can't seem to get it is that you are getting $58k worth of benefit for $20k.
That benefit is taxable as income - plain and simple.

A better way would be to buy the pills for the lower cost - say $1000 and donate them for $10k. You are not getting a benefit from a third party.
Well doing that way - these shady companies don't benefit.
Maybe I will do that myself - excluding the shisters and shills.

Thanks for the tip.

you thanked yourself for a tip? :rolleyes:

[pgcanred]

What we are saying and you can't seem to get it is that you are getting $58k worth of benefit for $20k.
That benefit is taxable as income - plain and simple.

A better way would be to buy the pills for the lower cost - say $1000 and donate them for $10k. You are not getting a benefit from a third party.

It is not that I don't get it Jovi. Its just that you are wrong. First of all it wouldn't be taxable as income, but it would be a capital gain. CHT uses a trust structure so there is no capital gain.

Your last idea wouldn't work because of the changes proposed to the Incom Tax Act that will be back dated to Dec 5th 2003. The changes stated that if the property was in your possession for less than 3 years then the fair market value (i.e. the value put on your donation receipt) would be the lesser of the cost of acquisition or the fair market value determined by other means. So you would get a receipt for $1,000 and not $10,000.

[Jovi]

It is not that I don't get it Jovi. Its just that you are wrong. First of all it wouldn't be taxable as income, but it would be a capital gain. CHT uses a trust structure so there is no capital gain.

Your last idea wouldn't work because of the changes proposed to the Incom Tax Act that will be back dated to Dec 5th 2003. The changes stated that if the property was in your possession for less than 3 years then the fair market value (i.e. the value put on your donation receipt) would be the lesser of the cost of acquisition or the fair market value determined by other means. So you would get a receipt for $1,000 and not $10,000.

But your scheme is from companies that have:
no web sites
can't find any results from searches on Google
that you have not given us any info on except your say so
have been debunked by journalists

Ya I will invest with you.

BTW - why do you have to mail the info, why don't you scan everything and send it by e-mail?

Is it because its a big secret?
Trying to keep it low key?
Only select investors are invited?

Till you provide adequate proof I will remain skeptical.

[bdckr]

In the world of private individuals or corporations you are right. But since when has a government agency been worried about the return on cost of one court case? Especially when significant victories well publicised would stop others from participating in these programs. I stand by my original statement.
When it means they can win (get money) and focus their limited time and resources elsewhere. Negotiating a settlement is not an admission of failure (your claim in an earlier post) for either side.

It may also remove the small uncertainty of a judge or jury verdict.

Is it possible the government settles a case it thinks it will probably lose? Sure.

Is it possible the government settles a case it thinks it will probably win? Sure.

As you've mentioned, there is an appeals process which can be very lengthy and costly. The government can (and sometimes does) choose to direct its resources elsewhere.
A valid point. I think it is 7 years. However they only need one test case and all returns using the same tax shelter ID would also have lost as well.


Based upon last years estimate to defend a case like this was $120,000, and the estimate for an appeal $60,000. I assume it has gone up this year but not by too much. As mentioned above the CRA would only have to pick one test case and the same ruling would apply to all particpants who used the same tax shelter ID.
You're assuming in that first bit that anything brought to trial would be a loss for "the same tax shelter", which in the case we're discussing is your tax shelter.

This assumption doesn't reflect well on your confidence in the prospects of a legal defense.

If I assume that was just an error in phrasing, you also shouldn't assume that the government will give up after losing one tax case. After the initial trial and appeal sucked up $180,000 of your $500,000 fund (your numbers, not mine, none of which I can substantiate) the government would now have a bit more experience to help it try other similar cases. Either they could look for enough differences (in the next case) to justify another trial, or they could look for another point of law as the basis for challenging the shelter. Which would mean that the $500,000 you mentioned would be almost enough for three defenses.

So I'll stand by my original comment that $500,000 isn't a lot of money, and if you are caught, you should hope that you're one of the first few people needing those funds.

One ruling would become case law. If it's a loss, it also lets lawyers and accountants advise their clients to avoid something similar, but anyone already involved would up a creek. If it's a win, case law makes a good argument at the next trial, but it doesn't save you from ever needing to defend yourself again.
Its a little more than a cosmetic difference. These are real drugs that real people need. How many lives would an old copy of MS Office save, or a timeshare in Collingwood? Thats not a cosmetic difference. Apart from the fact that the value of software and timeshares are kind of hard to appraise and not always easy for a charity to liquidate.
Let's not lose sight of what we're discussing. It is a cosmetic difference in the context of a tax shelter.

It's a tax shelter for saving money by donating to charities. As long as it's a legitimate charity and a legitimate donation is being made, then it doesn't matter in the eyes of the CCRA (or an accountant) the relative merits of one charity over another, as long as it's legitimate.

You were the one that mentioned that the CCRA does:...try and frighten people out of doing something like this.
The perspective that matters is the CCRA's, and in their eyes, the differences between what one legitimate charity and another legitimate charity does is cosmetic.

Your own value judgment that donating drugs (for people's health) is better than donating art (for enriching people's lives) or donating software (for giving someone an education or the chance at gainful employment) is just that: your own value judgment. It has no bearing on the legitimacy of this tax shelter or any other. It may make you feel warm and fuzzy inside, but I don't think the CCRA cares about that.

You raised the possibility of having this particular tax shelter lumped in with a few illegitimate shelters. That's why I'm asking your reasons for thinking that this is different from the other illegimate shelters that you brought up.

Sorry bdckr I just noticed you had this question in another post. I do not have a sample list for a specific valuation. But included in the package are lists of the drugs supplied. Which drugs will be used as a result of an individuals donation will depend upon the charties' needs at the time.Is there any reason why you can't just post a list of the drugs here?

[grant]

It is not that I don't get it Jovi. Its just that you are wrong. First of all it wouldn't be taxable as income, but it would be a capital gain. CHT uses a trust structure so there is no capital gain.

Again I point out: there would be no tax on the $58,000 in pills because they are a gift. Gifts are not taxable in Canada. This is true whether the gift comes from a person, a corporation, or a "trust" organization.

This "trust structure" is merely a mechanism to hide the reality that a person is BUYING the pills.

The real danger to a taxpayer is that the CRA will prove that the $20,000 was actually used to purchase pills, and not a "donation" as claimed. If that happens, a person cannot claim their initial $20,000 deduction, and deductible value of the pills drops to $20,000.

This means, at worst, a taxpayer will be able to claim the $20,000 they actually put out of pocket (which actually seems logical...). Of course, that only reduces their tax by ~$9,000, but they'll have a warm fuzzy feeling in their heart...

... as will the pharmeceutical company, who sold ~$750 worth of pills for $20,000.

[Cough]

Of course, that only reduces their tax by ~$9,000, but they'll have a warm fuzzy feeling in their heart...

... as will the pharmeceutical company, who sold ~$750 worth of pills for $20,000.

LOL.... the warm fuzzy feeling will be in the belief that they have donated $20K but really they have only donated $750 to the charity. And it is not the pharmaceutical company who gain. They only get the $750. The people who gain the $19,250 are the "intermediaries" like pcganred and merlocke who are prepared to spend so much time on bulletin boards because even one "sucker" is good profit.

I think it is time to close or ignore these two threads.

And go ahead pcganred and merlocke.... another round of aggrieved protest from you is expected..... :D

[bdckr]

LOL.... the warm fuzzy feeling will be in the belief that they have donated $20K but really they have only donated $750 to the charity. And it is not the pharmaceutical company who gain. They only get the $750. The people who gain the $19,250 are the "intermediaries" like pcganred and merlocke who are prepared to spend so much time on bulletin boards because even one "sucker" is good profit.

I think it is time to close or ignore these two threads.
And go ahead pcganred and merlocke.... another round of aggrieved protest from you is expected..... :D
Agreed. I.. just.. feel... compelled... to... type...

[Merlocke]

But your scheme is from companies that have:
no web sites
can't find any results from searches on Google
that you have not given us any info on except your say so
have been debunked by journalists

Ya I will invest with you.

BTW - why do you have to mail the info, why don't you scan everything and send it by e-mail?

Is it because its a big secret?
Trying to keep it low key?
Only select investors are invited?

Till you provide adequate proof I will remain skeptical.

I'll email you a scanned copy

[pgcanred]

You raised the possibility of having this particular tax shelter lumped in with a few illegitimate shelters. That's why I'm asking your reasons for thinking that this is different from the other illegimate shelters that you brought up.
I don't think I said illegitimate. There have been some very dubious art deals. I have heard of cases of art being deliberately been created for the purposes of a tax shelter. The problem there would be how do you appraise the art and place a legitimate value on it? How does the charity liquidate the art so they can use the proceeds for their purposes? From what I understand the shelters based upon computer software were old versions of software, and again I do not know how you could easily establish the value. The pharamaceuticals on the other hand are needed by the charities, and are easy to place a value on (and subsequently easy to defend the valuation in court). Your point on the CRA making no distinction is absolutely correct, but being able to provide a documented valuation is important if it comes to it.

Is there any reason why you can't just post a list of the drugs here?
I just don't have an electronic copy.

[pgcanred]

In the context of the CRA going to court even when they do not stand a chance of winning I found this interesting article CCRA's Philanthrophobia (http://www.blakebromley.com/Pages/p_flaunting.html).

[pgcanred]

You're assuming in that first bit that anything brought to trial would be a loss for "the same tax shelter", which in the case we're discussing is your tax shelter.

This assumption doesn't reflect well on your confidence in the prospects of a legal defense.
I was speaking hypothetically about tax shelters in general. So it doesn't reflect any level of confidence in any tax shelter.

[pgcanred]

Man, you've helped me get my post count up.

I will make the thousand posts yet! :D

[Merlocke]

I'll email you a scanned copy

So - where can I post this info on the tax act that everyone is so curious about? :) I'll email it to someone if they're willing to host it.

[Merlocke]

For all the people asking for info mailed to them - please include your phone number. Fed Ex won't ship without one and it's rather annoying. Normal Snail mail takes forever as well.

[grant]

So - where can I post this info on the tax act that everyone is so curious about? :) I'll email it to someone if they're willing to host it.

why don't you just post links in this thread to the the relevant CRA articles?

[Sewert]

deleted

[TrevorK]

Straight from the CRA website - which sounds a lot like CHT:
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.


Now, the question isn't whether you think it's legal or not. The question is whether the CRA feels that this is legal. If they do not, they will reassess you and it will be up to you to prove your case otherwise.

If you jump into this, be prepared to defend it to the CRA. I'm not here to say whether it's legal or not (And I highly doubt anyone in this thread is), but one thing is for certain that there is a high probability of the CRA rejecting this.

The CHT people obviously believe this - as they have setup a legal fund.

[pgcanred]

I thought this discussion was rather dead.

But just to let you know I used an arrangement similar to CHT but without a lien and received a substantial tax refund. The CRA took a little longer as they took a closer look at my return but paid the refund with interest.

The comment from the CRA is certainly aimed at the likes of the CHT, however they haven't understood the arrangement. No donated monies were used to pay off the lien. The cash donation and gifts in kind would be two separate transactions involving two different charities.

The point of the defence fund is so that the individual would not have to fight any challenge themselves. All the transactions from any of these arrangements either stand or fall together.

[grant]

I thought this discussion was rather dead.

But just to let you know I used an arrangement similar to CHT but without a lien and received a substantial tax refund. The CRA took a little longer as they took a closer look at my return but paid the refund with interest.

The comment from the CRA is certainly aimed at the likes of the CHT, however they haven't understood the arrangement. [snip]


In your place I wouldn't count my chickens yet! The CRA can (and has) re-assessed people several years after they filed their return.

Best of luck to you however.

[pgcanred]

In your place I wouldn't count my chickens yet! The CRA can (and has) re-assessed people several years after they filed their return.

Best of luck to you however.
Thanks for the kind wishes. Rest assured I am not counting my chickens.

The CRA has also lost a number of cases this year.

[Daigo]

... and I almost forgot, the Canadian Humanitarian Trust is nowhere to be found on CRA's list of registered charities:confused: .

[brunes]

I love how people like to play this game where they assume for some strange reason that the CRA is staffed by complete idiots who haven't already thought about and fought against all these illegal sheltering schemes before.

If you want a tax shelter, move to Bermuda.

[elty]

Essetnailly.... you are buying some cheapo drug at a inflated price (but still lower than the "accessed value"). When you get busted by CRA, the donation amount is reduced to the money you donate. However the so call charity just make free money by selling you some $750 worth of cheapo drugs for $20000.

[Daigo]

CRA does not include the Canadian Humanitarian Trust
in its list of registered charities.

Reputable tax accountants will not process these donation receipts.

It is against CRA Rules (and thus, against the law) to
"Profit" from a charitable donation.

On what planet could anyone possibly think that it's OK
to net $5000 from a $1000 donation? Where do you
think the money comes from? Honest tax payers, that's
where.

I hope that everyone who has ever used this scheme has
to undergo a detailed audit and is fined $100 for every $1 they tried to steal from me.

[Rehan]

The audits are already being discussed in another thread:
http://www.redflagdeals.com/forums/showthread.php?t=496537

This one is ancient and better off locked.