These types of schemes are screaming for an audit on your tax return. Unless you want a red flag on your tax return, I would avoid.
With respect to this, a lot of these tax "shelter" promoters claim that they have already assembled a team of heavy hitter lawyers to counter any challenge by the CRA in courts.-In 2008, Canadian courts have continued to confirm the CRA’s position with respect to these schemes.
To add to MoneyGal's comments, I should caution that some of the comments in that post were probably by tax shelter promoters. But I wish to draw your attention to comments from tax payers who participated in these schemes and are worrying about an audit. Best to stay clear, IMHO.As the CRA cautions, it's very important to get independent financial, tax and legal advice before investing in a tax shelter - and not from someone connected to the scheme or to the promoter.
In separate cases now before the courts, two Canadian law firms are being sued over tax opinions given on two donation tax shelters. Investors in these shelters are now facing tax reassessments from the CRA.
Of course, as a taxpayer, you have a right to appeal the CRA's assessment and the results of an audit. You also have the right to file a notice of objection against any reassessment. You have the right to fight the CRA in the Tax Court of Canada, the Federal Appeals Court and the Supreme Court of Canada if need be. During this time, collection of any outstanding unpaid taxes may be be put off. During this time though, the outstanding balances accumulate interest, and the CRA's reference interest rates can be pretty high.Regarding the fact that nobody has HAD to pay back the disputed amount, I think that even you too are falling into the faux pas of believing that the CRA's opinion is, indeed a final ruling. Because the CRA has sent out "collection letters", does not mean that you HAVE to pay the disputed amount or even agree with it.
There has been no final court ruling on any of the cases save the Klotz & Nash's, which were 100% "favourable" depending on how you look at it.
Hope this clarifies my points.
"Schemes" is the important part - which why I think that the "smell test" is a good reason to do more investigating to make sure everything is kosher.Although the standard criticisms about many older tax shelter schemes may have been applicable in the past:
"Donating $2000 and getting a receipt for $4000 doesn't pass the smell test"
"If it sounds too good to be true, it probably is"
You folks have to realize that we are no longer in the dark ages. It's unbelievable how the newspapers & 99.9% of the people reading these forums still think most of the tax shelters of today are even remotely similar to the ones that are no longer running!
To suggest, based on the flawed & ridiculous logic, that you can't get more than what you paid is so simply proven wrong that you only need to look as far as your next credit card donation:
You can donate $1000 using your Visa and then pay $10 in interest without choosing to pay your full debt off until much much later. There you have it - everybody who donates using this method are sure "asking for it", eh?
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Nobody does those old "buy low/donate high", "inflated receipt" programs anymore but, despite popular belief, nobody has HAD to pay any money back & NONE of these programs have lost in court!