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moneysense.ca, 19/08/08
Beware of tax shelter donation arrangements
Recently a friend asked about a “tax scheme” that claims to buy medicines for AIDS patients (“Fight AIDS Save Taxes” is its slogan) in Africa and provides a tax receipt for four to five times the donation amount. While stiffing the government, helping AIDS patients and putting some money in the pocket may sound like a win-win situation all around, participating in a tax shelter scheme is asking for trouble. The Canada Revenue Agency has a clear position on these schemes and titled a recent alert, “Warning: Participating in tax shelter gifting arrangements is likely to result in a tax bill!” The text of the alert also provides no room for confusion:
New schemes are being marketed that claim to be different from those for which the CRA has previously issued warnings. Taxpayers should avoid all schemes that promise donation receipts for 3 to 4 times the cash payment. It is the CRA’s position that the proposed legislation, effective since 2003, will apply to reduce the donation credit to no more than the actual cash payment. Furthermore, as indicated above, completed audits have shown that there was effectively no gift being made in many cases, and as a result, the donation was reduced to zero.
The Toronto Star ran a series of investigative pieces on charity scams last year available here, here and here. An accompanying graphic to the story illustrates the risk involved in these schemes. A taxpayer made a donation of $10K and received a tax credit of $21K (probably adjusted for the original donation), got audited and the taxman wants $35K in back taxes, interest and penalties. Despite the CRA warnings and media coverage, it appears that many are falling for these schemes — the aforementioned “charity” claims to have raised $165 million so far.
moneysense.ca, 19/08/08
One of the promoters of ParkLane was Roy Beyer, who is now Director of Marketing with Foundation Capital Corporation / Harvest Capital. Harvest has also marketed some questionable investments, including ‘The Land Development Company” and “Payday Today USA”. Google to find out more.
My wife and I investigated 4 charities that suit our tastes, and those are the only ones to which we donate. All the cold callers, no matter how good their causes may be get turned away politely.
Old adage “you can’t cheat an honest man (or woman)” comes to mind. This little saying has literally saved me thousands of dollars whenever someone comes up to me and tells me about the latest money saving endeavour that sounds too good to be true.
Scamhater: Like the Toronto Star says, it is astonishing that these “charities” simply shut down and start another when they are audited. I would think that they should be prosecuted because fraud is a crime and should be treated as such.
Al: We have a handful of charities we support and the only exception I make is for young children who knock on the door (they don’t give out gift receipts though).
Novice: I agree with you that “give $10 and get a $50 receipt” does not pass the BS test. And the CRA issues tax alerts every year and tax payers who participate in these schemes can’t say they weren’t warned.
Canada Revenue Agency has an informative and free speaker’s kit on charitable donations which covers donation scams. It includes a PowerPoint presentation, pamphlets etc. and is ideal for investment club discussion. Find out more here:
http://www.cra-arc.gc.ca/E/pub/xi/rc306-k/README.html
Gail Bebee
Author of No Hype-The Straight Goods on Investing Your Money
Hmmmm. CRA issues charitable status to a charity (which they presumably investigate before doing so), then decide that it’s not a charity after all, and those who have donated are screwed?
While I understand fully that these charities are used to structure the tax shelters, and that it’s very much ‘buyer beware’ when using such a shelter, it’s not as simple as those above make out.
CRA is an extra-legal organization which bullies people into paying taxes they may not owe, and will not provide clear guidance as to where the lines are. Just call CRA 3 times with a complex question, and usually you will get 3 different answers. Ask them to put it in writing, and they won’t.
Why can’t CRA investigate a tax shelter before issuing a tax shelter number?
And I hardly think that regurgitating vague, threatening ‘Alerts’ from CRA (why don’t they specify, name names?) and quoting the shoddy financial journalism of the Toronto Star passes as wise counsel from the Canadian Capitalist. Sad.
Gail: Thanks for the link.
Brad: The CRA simply registers a charity initially and assumes that they will collect donations and spend it for charitable purposes. They do audit and revoke registrations but how are they going to tell a good charity from bad at the time of registering?
It is a good question why the people running these charities are not prosecuted when they are found to be frauds. I don’t have an answer to this.
But, I don’t find anything vague about CRA’s alerts. They specifically mention that if the receipt is many times the donation, the taxpayer is taking a risk of the charitable contribution being denied and interest and penalties applied.
The Star’s series has named names, pointed out the abuses of the system and demanded action. How is that shoddy journalism?
Whow CC, you sured failed Brad’s high standards this time. Didn’t I read somewhere on your site that you do not purport to be an ‘advisor’ and therefore nothing on this site can be construed as ‘advice’ (or ‘counsel’)?
Moving right along, thanks for the heads-up, I will be investigating the ‘shoddy financial journalism’ of The Star next. I fear investors will fail to recognize to-good-to-be-true schemes for what they are until the end of time.
If something seems to good to be true, it usually is.
I am suprised at the number of people I know that gave money to these types of scams for the sole reason that they could get a deduction in excess of what they paid.
I know one guy who “doesn’t believe in RRSP’s” but was keen to throw $5,000 at one of these scams. Ridiculous.
CC, not to discourage you from giving to kids (I do as well) but you mentioned:
“Al: We have a handful of charities we support and the only exception I make is for young children who knock on the door (they don’t give out gift receipts though).”
Down here it became a big scam for kids to go door to door “raising funds” for something and just pocketing the cash, so residents were advised that if it is a real charity, it should have a receipt, and if it is fundraising for something else (such as a school trip) then the student should show an official letter from the school indicating such.
Unfortunately, the scams out there hurt many legitimate tax shelter programs which don’t involve the dreaded “inflated receipts”, etc.
Question: If a program existed which didn’t harm the charities & followed the letter & spirit of the law exactly ( i.e. – no GAAR), do you think the CRA could EVER afford to say it was “okay”?
Get real people – The CRA has an agenda, and even though the law allows for tax avoidance and defines “tax shelter” in the income tax act, the CRA can never afford NOT to challenge a program or everybody in Canada would participate & never pay tax again!
Focus on the LAW – not your feelings, newspapers, or the CRA and you will have your answer as to whether a tax shelter program “works”.
I guess none of you happened to read the retraction that very journalist did on the above mentioned article. Check it out at: http://www.canada.com/edmontonjournal/news/local/story.html?id=03a299c4-a493-4f11-acb7-5fdd381c88bb&k=60351
The Toronto Star article was overly simplistic and clearly written by someone not drilling down on the analysis and painting the entire industry in one broad-stroke. It would be equivalent of them writing that all finance blogs give improper information.
Like any other investment product, there are good ones and there are bad ones. The legitimate tax shelters have been challenged by CRA and, the majority of them, have survived court challenges (the tax lawyers who advise and give opinions on the legitimate ones are a who’s who of the corporate tax bar in Canada; you have lawyers charging $800 per hour against a government lawyer who wants to leave at 4:30 every day- hardly a fair fight). The reason why you never hear of CRA losing these challenges is because the original legitimate tax shelters had a minimum buy-in that precluded most middle class citizen (usually starting at cash contributions over $25,000) so why would a media outlet like the Star report on that?
As with all things, greed took over and the products went retail. This is when the scams began to happen and because of the number of people claiming credits CRA had to act to defend its bottom line.
There’s good tax shelters and bad ones. If the entire concept of tax shelter make your eyes glaze over. Avoid the entire industry.
Of course, I would like to point out, from the all the background noise, what the real problem is. If the tax rate was actually fair and low there would be no need for this entire industry- good or bad. Let’s remember why we all spend countless hours looking at shelters and figuring out ways to deduct interest off our mortgages etc. We all feel our taxes are too high and attempt to find ways to minimize them.
Excellent points!
I agree entirely…
S.
[...] Canadian Capitalist warns us to beware of tax shelter donation arrangements. [...]
I worked for a fundraising company a few years back. They raised money for questionable and not so questionable groups. And regardless of their real merit, if you’re being propositioned with an offer for charity giving then just simply don’t do it.
The company I worked for never exceeded 22% for actual “charitable offerings.”
And that’s a high number for the “fundraising industry.”
Never give to solicitors of any kind, unless you truly believe it’s worth it simply to help your local (for canvassers) or international (for telemarkets) job markets.
Pick a charity. Research it as you would a stock, to ensure the money might accomplish *something* and then enjoy your minor tax benefit.
Charitable giving should be about doing something you believe in, not a minor tax deduction. It’s one place that I simply can’t find selfishness to be ironic.
Column in the Globe and Mail that CRA says a charity is running a tax-shelter scheme:
Link
Yes, this charity works with a “Trust structure” (warned against by the CRA) called CHT (Canadian Humanitarian Trust).
These type of programs are worse than the “buy low, donate high” programs of old as they are buy NOTHING and donate high.
If you are participating in a tax shelter, be sure that it only gives receipts for the price paid for items donated & that charities are achieving a 100% disbursement quota. They DO exist – do your homework!
I wish that you would get your facts straight before you bash this particular tax shelter. In the above example it was not a donation of 10k, that was just the prepaid interest on the full donation amount of 40K. It is no different than donating on a credit card.
Hi Stuart,
You are mistaken. You are referring to the COIP program, which helps donors use credit to make a donation. This is very different than the
CHT program, which I mentioned in my last post, and uses a “Gifting Trust” structure, which gives donors something free from a trust & they donate it to charity to get a receipt.
I think you are simply getting the 2 of them confused, right?
Steve,
Any comments on the COIP program?
All,
Does anyone have any comments in regards to the COIP progam?
Hi Anna,
I personally feel that the COIP program is perhaps the strongest donation tax shelter program in the country, based on a few very important criteria:
1) No CRA warning of this type of structure
2) No inflated receipts (i.e. – donation receipt = purchase price of donated goods)
3) Deflated receipts are present (1st donation is 20% less than FMV “otherwise determined” by appraisers) due to reduction based on purchase price & 2nd receipt is reduced to $0 despite a small cash donation.
3) No charging any fees to the charities involved (i.e. – charities are perhaps the highest performing charities in Canada due to OVER 100% disbursement quotas)
4) GAAR inadmissible by law by the presence of SAAP’s – Deflated receipts & interest component not tax deductable.
Just my opinion…
Steve,
I agree. I tried to get as much info as possible and every time I call the CRA they never have a straight answer for me other then “do not get involved”. That is unacceptable answer. I will donate this year and hope for the best.
I truly can not find anything wrong with this program.
Thanks Steve, greatly appreciate it.
.
That’s like asking Dracula if he thinks we “really” need our blood or whether we should give it to him…
Steve
Hi Steve,
I got a questionnaire to fill out for CRA in regards to my COIP contribution in 2007. Did anyone receive the same?
Everyone received/will receive the questionnaire from CRA. It’s one of their harassment/fear-inducing techniques. This, along with the attached warning. You just need to deal with it.
I contributed to COIP in 2006 onward. I completed the same questionnaire afterwards. If you haven’t already received it, COIP will send you a letter or email showing you how to complete it correctly. It’s a bother, but well worth the time.
Some people who commented above don’t seem to be aware or understand some basic facts regarding tax shelters. First, there are many tax shelters; your RRSP or LIRA are but two of them. Second, what matters is not somebody’s first (usually wrong) impression, but the law. Third, to my knowledge, only one tax shelter has ever been convicted in court. (The buy art low, donate high one.)
Even with the truly egregious tax shelters, CRA usually comes to some agreement to reduce the benefit at worst.
In the case of COIP, I believe they’ve followed the law. That’s what matters. Steve above pointed out some of the reasons why this is the case. There are more, so check them out for yourselves.
CRA’s job is to collect money for the government. They like going after easy targets like individuals rather than the really rich and corporations who have the legal muscle to fight them.
That’s why COIP’s got a $1 million defence fund built up. They knew the CRA would audit the program. But they also know that the program is on solid footing and thus eminently defendable. I think that CRA knows this too. Now in its fourth year, why hasn’t the CRA done nothing more than levitate boogie men?
Finally, the government could have made this program truly illegal easily by changing a few things in the law. But it hasn’t. Why not? Maybe it’s because they get praise from the leaders of the countries who’ve benefitted from the AIDS drugs donations even though they’ve been cutting back of foreign aid? I don’t know.
My only advice is to not depend upon the words of agenda-laden reporters or knee-jerk reactionaries. Take a close look at the details and decide for yourselves.
I agree with Richard.
It’s important to note that the end result for the Klotz/Nash case which “lost” in court was that the donors receipts were reduced to the price they paid for the artwork – is this a loss? Maybe for the individual’s net cash-on-cash return, but what do you expect if you intend to save your taxes this way? This court decision is what the COIP program was based on: the price you pay = your donation receipt. Klotz & Nash supports the COIP program. The results of that case prove why the COIP program works.
Steve
Thanks Richard and Steve…there is a lot of misdirection and falsehood out there. Its nice to have some clarity!
Can anyone tell me how long does CRA have before they can audit me. I have done the program since 2007…I don’t think I will do it this year. When can I stop worrying they won’t come and ask for the money back.
“Normally, the CRA can only go back three years to reassess a prior-year return. However, if an error or omission was made out of neglect, carelessness or wilful default, the CRA can go back as far as it wishes.”
Link
thanks for the reply…they only have three years to do that. If I did the program in 2007, they have until 2010 to autid and go back as far as they want. Once the 3 years is passed they can’t do an audit or ask for the money.
in reference to the “fight aids save taxes” the promotors of the “COIP” and “MISSION LIFE FINANCIAL” programs check out their websites. when i first heard about these programs i spent two and a half months researching them. the only negative feedback i found were peoples opinions based on fear. yes there are many tax shelters out there that are in my opinion illegal. after all my research i then phoned revenue canada at (1-800-267-2384) charities client assistance. i told them that i wanted to invest in a tax shelter and his responce was “you do not want to get involved, there are too many grey area charities” i then asked about a specific charity. the one that “COIP” uses called THE ORION FOUNDATION tax shelter #119213122 RR0001. he told me they were in the top 1% of charities. they did everything acording to there, mission obligation, when audited a few times per year. “THE TAXMAN SOLD ME ON THE TAX SHELTER”. i bought into the program, and became an ambassador #10219 “fight aids save taxes” if you are interested in saving big time on your canadian personal taxes i can help you with your questions. just e-mail me at bfirbank*no spam* @telus.net. remember when you fill out your income tax return there is just one line to put your donation amount in. with no charity name its your word only. with amounts of $20000. or more dollars the taxman may want to confirm your donation receipt by faxing it to them if they get in touch with you. give me some feedback please!
can someone recommened a good accountant who knows this program…if you do pelase email me at joshi04* no spam* @hotmail.com
Have you heard that COIP has been replaced by Mission Life Financial inc. (www.missionlifefinancial.com)?
What happened if we get audited by CRA now?
Can anyone explain?
Email Steve who works for COIP and see what he says.
When donating to charities, doesn’t it sound suspicious off the bat if the charity is willing to issue a receipt for more than the donation? When I donate to a charity, my aim is to help the less fortunate, not make a profit on the donation. IMO, getting more money back from the tax man than the actual donation itself simply doesn’t pass a basic smell test.
Steve,
do you have any comments?
Does anyone have any comments on how they see the outcome will be for COIP?
I guess Steve is hiding with all our money….I guess you and I will find out the outcome when we get audited.
His silence is intriguing me. Why the silence…..ANYONE????
i would call COIP and ask for Steve…if you need his email and phone number let me kow.
any updates?
Does anyone know how to proceed once CRA send out the reassessment?
not sure as i’m waiting for that as well. They have up to 3 years to reasses you. Hope they don’t sent out a reassessment letter.
Good morning all,
I briefly spoke to a COIP representative. He explains that if we receive any reassessment for the CRA, NOT TO PAY and send it to COIP immediately. They will take care of it for you.
The worst case scenario is after 5 to 10 years from now with many discussions with COIP lawyers and CRA. If at the end of the court case..etc..etc.. We lose they will ask us to pay a maximum of 50% of the checks we wrote. No penalties and no fees. I figure if this is the worst case scenario..it is that bad!
Can someone please verify with their COIP representative if this is true? I still find it odd that they will come after the money I advance instead of the tax receipt I received…… any thoughts?
I called COIP head office and they told me the following that could happen:
• WIN at supreme court
Or
• We lose and we need to reimburse 100% what we received.
OR
• CRA can’t afford to go to court so we settle on $.30 a dollar…
One question two total different answers!
Any thoughts….
Your second comment is true, not the first one. If you don’t pay the reassessment, interest will be billed until the final decision. Worst case, you pay back your refund, all the interest plus penalty.
Actually they say NOT to PAY the reassessment! At the end of the day a decision will have to be made and at that point interest and penalties will be waived even if we have to reimbuse all..
not paying is fine but they will ask for interest and penalty. This is CRA…they won’t let that slide.
“CRA can’t afford to go to court so we settle on $.30 a dollar…”
I somehow doubt this is the case. CRA probably employs an army of lawyers and profitable donation schemes are juicy targets.
I second Ravi’s opinion. CRA would likely be after for interest and penalty. Anna, did you get reassessed?
Not yet. I donate in 2007 and 2008. What I don’t understand is that I did do my due diligence and they confirmed that there was no warning against COIP. How can they now tell me otherwise? I called the CRA plenty of times asking the same question and I never got a negative feedback.
I am sure that the CRA will try and ask for interest and penalty BUT I was told by 3 different people at COIP not to pay anything.
Anna, i’m looking for somone to do my taxes. Would you mind emailing me the person you used to joshi04@hotmail.com.
I called CRA this morning and there are no warnings against COIP. They said that they will audit everyone that donates to tax Shelters regardless the shelter that they are in. This doesn’t mean that COIP isn’t complying with the law. COIP does not issue inflated receipts.
There are 2 other tax shelters that are in discussions with CRA and I am sure that both parties will come to some arrangement. The law is vague and there are loop holes. If the CRA was totally against tax shelters, why do they still allow us taxpayers to donate a maximum of 75% of our salaries?
I personally think that COIP is a strong organization hence my donation. You should not be afraid of the CRA. We also have rights!
I have just heard about the tax shelter called Missionlife. I have been in the process of researching it. That is how I came across the site; I used the terms ‘scam missionlife’. Both myself and my son are interested the donation component, but I am scepitical about the tax shelter scheme. So please provide more information, as I keep researching. Thank you,
Susan
hi all : i have four pages of questions and answers re: MISSION LIFE andCOIP. e-mail me at bfirbank*no spam*@telus.net with a fax number and will fax to you. in time i will post them here. these TAX SHELTERS, in my opinion the best tax shelters in CANADA for the average person
now if only we could overcome fear,cynicism,laziness, bad habits, and arrogance we could have fun working towards financial freedom!
have a great week! brian
Brian: Why don’t you send it to me via email at cc *no-spam* @canadiancapitalist.com? Personally, I feel that charitable donations are just that — money donated for charity, not money to make a profit on. There are so many ways to make money — making profits on charitable donations is not worth the hassle IMO. I can totally understand why CRA takes a dim view of donation tax shelters.
Has anyone heard from Brian? I emailed him twice.
yes
can you please pdf them and send it to me at
4friends1972@libero.it. THANKS
I am quite curious on the information that Brian’s has.
ANNA: i tried to e-mail the 4 pages to you but they would not go through. Canadian Capitalist please e-mail me your mailing address and i will send you all pertaining information on MISSION LIFE FINANCIAL at bfirbank@telus.net, if anyone else wishes more info let me know.
Thanks Brian. I got it
Here’s some very good info put out by a lawyer in Ottawa. It pertains to donation programs, .
http://www.troublewithtaxes.com/donationsvid.html
I noticed the “Canadian Capitalist” mentions a few times that he/she can’t understand how somebody can get a receipt for more than the amount donated, therefore these tax shelter programs must be bad.
The first part is absolutely correct – you cannot get a receipt for more than the amount of your donation.
The second part of these statements, however, is where you are missing the key facts – you don’t get a receipt for more than the amount of your donation in any of the better tax shelter programs, and this is why they are exactly in line with the letter & spirit of the law.
I think where people get confused is the fact that people are FINANCING their donations and only paying interest, etc. up front & have a debt that must be paid back down the road. These programs are actually only tax DEFERRAL programs & not true shelters.
“Getting a donation receipt for more than what you pay” could equally be applied to people who use their Visa to donate $1000 to charity & then only pay $10/month as the minimum payment.
The newspaper articles, the CRA, & even people on this forum all scream “Scam – These people are getting inflated receipts! They’re donating $10 to charity & getting a receipt for $1000″
Get real, people – we’ve grown up. Tax shelters have changed and the old problems don’t apply. Now you can do well by doing good – they’re not exclusive any more. Do your homework on philanthropreneurialism & hybrid philanthropy and don’t believe the hype people give you especially if it doesn’t apply! Just because people can’t understand it, doesn’t mean that there’s a problem with it.
P.S. – Nimi & Anna – sorry if I didn’t respond to you earlier, but I only visited the site once or twice & made a few comments. Although I enjoy it, I don’t read this blog like the daily newspaper!
A note on Anna’s and Ravi’s recent coments about not paying the reassesment… You have 90 days to send an objection or dispute to the reassement. Once you have done this you don’t owe cra anything until the final court ruling between them and the tax shelter at that point you would owe them whatever the ruling was but no interest. It is your legal right to dispute their decision and they can not charge you interest while this dispute process takes place. if you just didn’t pay when you received the reassesment they would charge you interest, send the file to collections, and you would put a ding on your credit score. if you took the money you received back on your tax return and invested it in a secure low risk investment investment even if the judgment forced you to pay back 100% of what you received you would still get to keep the interest that you earned on that money in the 8 – 10 years it took for the whole process to occur.
some of the wealthiest people in our country use these tools to get even further ahead, we probably can’t afford the type of advisor’s that they have access to so it is up to us to take a cue from them and educate ourselves as much as possible.
cheers!
B,
I am assuming that we will give something back But not 100%. It will most likely be an average from 30% to 50%. We have a strong case and even till today the CRA has nothing negative to say about COIP/MissionLife program. In Canada there has not yet been a case that had to reimburse 100% even the buy low sell high art programs came to an agreement
I made the tax shelter donation to ICAN through GLGI in 2006, to Barter World in 2007 and COIP in 2008. While enjoying all the tax savings, i fnally got the audit from CRA on ICAN. The bad part is that CRA suspended ICAN indefinitely in 2007 when ICAN could not provide edequate numbers for CRA’s audit. But my donation was in 2006 to ICAN, so I don’t know if it would make any difference. The letter stated that unless I could provide more backup to support my claim within 60 days, CRA would deny my donation claim. I did exactly what GLGI advised and now it’s over 90 days and I still did not get any response from CRA for denial. I wonder if anyone have similar experience. Thanks for your time.
Once you file the NOO(notice of objection), the CRA is no longer your administrator; the CRA then becomes the opponent in court. The CRA will select a few cases. Based upon the result of the cases the ruling will apply to all. This can take between 5 to 10 years
Anna. Thanks for your information. What do you mean by “CRA will select a few cases”. So far it’s been more than 3 months and I still haven’t received any denial notice yet. Hope I never will. I still plan to do the donation again on COIP. Seems like this is more reliable organization.
William,
Please contact Brian at bfirbank*no spam*@telus.net. He will fax you four pages of questions and answers re: MISSION LIFE and COIP. This will answer all your questions. If you don’t get a hold of him please email me.
Anna:
Thank you. I was busy working two jobs and couldn’t come to this website until today. Thanks for the information. I’ll contact Brian and will go from there.
Hi all,
I just received the CRA 2008 Questionnaire regarding the COIP tax shelter program.
Has anyone else received it?
Hello Anna, I have received Questionnaire for 2008 as well. I got the questionnaire for 2007 in February of this year, filled it out and send back to CRA.
I am glad to hear we are the same track. Have you contacted COIP yet?
Yes, the reply was, I quote:
“Yes we’re aware that our donors have just begun to receive this, we were expecting it. We’ll have a response ready for you within the deadline. The only thing we can not send you is a copy of the cancelled cheques. I suggest you phone your bank and have them send those to you (we only have copies of the front of the cheque before it was deposited). Please contact our office if you have any questions. “
I will contact them tomorrow am.
What do you think is next?
Hi Anna & Aleksey:
I received the questionaire last Friday too. A bit nervous about it. How do you guys feel?
Hi William,
I feel the same. I donated 2007 and 2008. I normally don’t take risks like this BUT I guess time will tell……
Well, I am much more riskier then you guys. But before I invested I found out exactly how the process goes.
This is what is going to happen next:
COIP will send you the pre-filled questioner. The only blank space will be to put your own personal information in it. Also they will send a manual explaining what is what.
Next year you will receive the letter from CRA saying that you donation claim was denied, you have to pay penalty or something in that manner, a lot of bull crap basically. Probably you will freak out after that. You will contact COIP and they will tell you what to do. You will file against CRA’s claim and CRA will back off and that is pretty much it.
You will file an objection, at which case the fun will only begin. After you lose at appeals you can go to tax court.
Why would anybody buy into something they knew would be tied up for years in the courts?
Hi Aleksey:
I am prepared to be risky. I provided the CRA with whatevert the information they need and so far they didn’t send me any kind of notice that they would deny my claim. That’s the donation I made in 2006. I hope they will back off. If you said that you are more riskier, did you have the experience already before that you were denied and when you file notice of objection they didn’t respond at all?
Dan:
Sounds like you are not very much into this kind of tax shelter program. Until CRA clearly states that it’s illegal to do, I am preapred to face the challenge from them. I read a lot from the websites about how people feel about this tax shelter programs and there are many pros and cons and just confulse the hell out of me. However, if I go to the CRA site and read about the tax shelter program, the only thing they say is to make sure that the charity is legitimate and that they have the tax shelter nunbers. They warn the people to be careful in terms of choosing the charity group. in other words, the charity group is the key. If it’s illegal, wouldn’t they just say that we are not suppposed to get involved with this tax shelter program at all? Your opinion is appreciated.
William:
Well tax shelter numbers really does not really mean anything. They are just numbers for classification.
Dan:
Do you have anyone that you know that have lost the objection and had the donation denied?
Hi All,
I’ve called the CRA back in 2007 and 2008 and a few months ago and they still said that COIP was one of the top charities. They also said that they were audited a few times a year. So if the tax man at CRA tells me this why would they then audit me? And if this was illegal why issue tax shelter numbers? anyone??
Anna:
Tax shelter numbers are for indification purposes. What is your driver’s license number for?
Does anyone uses it? No, it is just easier to track by the number
I am not really questioning the tax number, what blows me away is that when i call, they never really say anything other that they have no warning and that they have been audited.
So why come after me? If its truly illegal why issue the numbers and why not stop it all together like other countries?
COIP seems to be a little different than some of the others. Am I right to assume that you people still owe the donation amount, only it is denominated in some sort of medical units? When do they go after you for the amount?
Why didn’t you just do something totally legit, like donate securities with capital gains?
I agree with Anna. If CRA really said that they audit COIP few times a year, I have to assume that auditing us the little guys is just a strategy to intimidate us. If we all make this type of tax shelter donation, they would have lost a lot of revenue. Obviously they cannot stop this tax shelter program because technically speaking it is still legal at this time. I think CRA can deny us only if they can find something fishy with COIP. If COIP does their part properly, we should be ok. I really want to hear from someone who’s been denied before and what they intended to do…..
Dan:
Do you have more information on the donation on securities? I heard something about it before from Bank of Montreal.
Hi Anna:
On your comments 86, I would assume that you referred “they” as COIP. Am I right? If so, did they say anything that they were able to provide whatever the information CRA requested? This part is important. ICAN got suspended in 2007 because the allocation of donation was not clear in the accounting; hence CRA suspended them indefinitely. Ironically former Prime Minister Jean Chrestien sent a compliment letter to ICAN for their job well done. How ironic.
@Steve: I believe you are saying that leveraged cash donations are kosher but CRA says otherwise.
http://www.cra-arc.gc.ca/nwsrm/fctshts/2004/m11/1125tx-eng.html
“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.”
I reiterate my original comment. Why would anyone want to risk participating in these donation schemes and worry about a CRA audit? It simply doesn’t seem worth the risk to me.
Hi Canadian Capitalist:
If you think that it’s not worth the risk, do you have any other program to help people saving the tax? After all, we do that for this main reason simply because the government charge us too high of the taxes……
William,
When I asked COIP if the CRA audits went well, COIP replied that they submitted everything that the CRA asked for BUT then when I ask CRA, they do no not release that information.
All this to say is that I expect to repay some back in about 5-8 yrs. As per my research with friends that donated to other programs some settle to pay back 40% with no interest and no penalty. BUT we should not settle and wait till the end..
What other programs are out there that can help save taxes??
@William: If you are looking at strictly saving tax, you can make RRSP contributions. You can borrow to invest. You can invest in flow-through limited partnerships. Or Labour-Sponsored Funds. Note that apart from RRSP contributions the others are not without investment risk. But all of them are without any tax risk — there is little chance that CRA will challenge these breaks. Charity donation schemes have both investment (it’s basically a double-or-nothing gamble) and tax risk and are best avoided, IMO.
Nobody likes to pay taxes but sometimes you have to bite the bullet and cut CRA a cheque. The alternatives may be worse…
Anna:
I made donation in 2007 to the charity called “Barter World”. The donation is almost like COIP with the loan to borrow and loan proceed to make donation. CRA did audit to their charity and somehow Barter World was able to settle everything with CRA, so whoever made the donations that year to Barter World would not be audited by CRA.
That’s great BUT it’s not the case with COIP. I received an 11 page letter from the CRA explaining why COIP is not being considered as an eligible tax shelter. I think this is routine for them. I am calling COIP this afternoon.
Have any of you received this?
Anna:
This one doesn’t sound good. Why would all of a sudden that COIP is not being considered as an eligible tax shelter when CRA stated before that they are one of the better ones around?
When did you receive this 11 page letter?
William
I received it last friday, COIP is putting together a package so all donors can respond. Apparently this is a standard procedure with the CRA.. COIP needs more time to respond so I am sending the CRA a letter of extension that COIP sent me. Lets the games begin…. What baffles me is that there is no warning against COIP yet they still send me a letter telling me that all donations have been denied..WTF!
They are denied every year automatically by the CRA. Then COIP is fighting back and so far won all of them.
Anna & Aleksey:
I also heard that even though some people got denied and they returned the money to CRA, the doners would get a form from CRA stating that if they wanted the money back, they were required to fill in that form and the money would be returned to the donors while the dispute was still on going.
I’ll try to get my representative and see if she has that copy of the letter from CRA.
I have no intentions of returning any money until the CRA conveniences me that COIP did not comply with the laws. Once I send the NOO (Notice of Objection). I don’t owe CRA anything until the final court ruling between them and the tax shelter. This is what my COIP representative told me .
lwas.
Anna:
You’re right about that one. I just don’t understand this. If it’s illegal, CRA can immediately deny the whole thing instead of sending us the money and then do audit. Don’t you think that it’s a waste of everyone’s time? If tax shelter program is illegal, then make it totally illegal, so we won’t get involved with it then. I just made some donation today for the 2009 taxation year. The amount is smaller than last year, but I still have a bit on the side and see if other opportunities available other than tax shelter. If not, I’ll donate more before the year end.
William
William: your 2006 participation in COIP, has the second loan been paid off yet? Your 2007 participation in Barter World, you mentioned that they settled with CRA, on what amount?
Hi Alnaexan:
I participated ICAN through GLGI in 2006, Barter World in 2007 and COIP in 2008. CRA suspended ICAN in 2007 for their inability to provide proper accounting numbers to support the donation amount for the year 2007. I am not sure if I’m safe for 2006, as I don’t think ICAN had problem with CRA that year. As for Barter World in 2007, they had some kind of settlement with CRA, so the donors won’t get the audit by CRA. I don’t know the amount Barter World settled with CRA. I am trying to get that letter from my representative about this. As for 2008, I participated the tax shelter program through COIP and you probably know that it’s done by way of loan, so the donation amount matches to the T5003 instead of inflated value by appraisal. I think the set up is instead of paying the whole loan proceed, we are to pay interest (initial amount to lender) and the proceed to be paid by way of purchasing drugs by wholesale price, which is significantly lower than the retail value. Do you have a different interpretation of COIP program? Your comments is appreciated.
I donated money in 2008 to COIP but I did not claim them when i did my taxes but they still sent me the questionaire to fill out. Do I still need to send in the questionaire eventhough I did not claim it on my 2008 tax return.
@Anna, @William: If you don’t mind me asking, how much was your cash donation? What was the amount of the tax receipt? And how much is the CRA asking in penalties and interest? Others can also
Canadian Capitalist:
for 2007 I made $7,000 with T5003 for $35,000. CRA did not ask for penalites or interest at all at this time.
Ravi:
I’m wondering why you still got the questionaire from CRA. If I were you, I would contact CRA first as to why you have to submit or if you need to submit the questionaires when you didn’t even claim it. Was it a big amount of tax receipt you got? What was the reason why you did’t claim?
i was scared and i did another way of doing my taxes. The receipt was for $28K. COIP said they submitted everyone name who did the program so that’s why CRA sent me the questionaire. I don’t want to call because then they will know who I am, etc. Please help
Ravi:
You should be ok because you didn’t claim it. If I were you, I would just inform CRA and told them that despite of your contribution with a receipt of $28k, you did not claim, hence you do not have to answer their questionaire.
Ravi,
I would not call them BUT send them a letter stating that you have no such clam on your income tax. This goes to show how unorganized they are…pretty scary..
Ravi:
Anna’s idea is ok too, if you don’t want to talk to them on the phone. Just send them the letter, stating that you don’t hvae such claim; hence don’t need to answer those questionaires. It’s amazing that they don’t even know that you don’t have the claim in the filing. Unoragnized is even understatement.
@ Canadian Capitalist
Sorry for the delayed response. COIP or MLF are not leveraged cash programs. If you read the details on the link you suggested: http://www.cra-arc.gc.ca/nwsrm/fctshts/2004/m11/1125tx-eng.html you will see that a leveraged cash program involves a loan of cash that is donated to charity.
It appears that you still don’t have a clear understanding of how these programs work as I’ve seen you asking many of the bloggers how much cash they donated & what receipt they received.
Donors in COIP & Mission Life do NOT donate cash to charities as their main donation, they donate MEDICINE, which they purchase. There is no loan of cash, which is what a “leveraged CASH” program is all about. This type of program died shortly after the buy low/donate high programs and haven’t been done since as the CRA warns about them (along with Trust arrangements) Coincidentally, they still do NOT warn against buying something on credit terms & donating it to charity, which is what COIP & MLF do.
There actually IS a small cash donation (i.e. – $200 in cash per $8000 worth of medicine donated) and the donor receives a receipt for $0 or a reduced amount compared to the cash. Isn’t that neat – a DEFLATED receipt from the charity. The CRA should rather people participate in these programs v.s. doing the same thing outside of the structure as they are giving LESS taxes back. Interesting, eh?
People – the whole concept of a “profitable gift” is perfectly fine as long as it’s not done with the charities providing funky receipts. These are all “gifts in kind”, not cash donations (for the main donation) & the donors cost of the item donated has to equal the amount on their receipt. How the person finances their purchase that they donated has nothing to do with the amount of the receipt. If that were the case, then somebody who borrows $1000 to donate to charity & doesn’t pay their
debt back for 5 yrs would be forced to receive a $0 receipt as it actually did NOT cost them a penny at the time of the donation!
I hope this is starting to sink in for some people…
Sincerely,
Steve
@Steve: I hope you’ll make clear if you have any affiliation with the donation programs you mention.
It is your opinion that the donation programs mentioned are NOT leveraged schemes. In my opinion, they clearly qualify as “limited recourse debts”. Credit card debt is not limited recourse — the only way to get out of it is to repay the loan with all interest due. I guess we’ll find out what view CRA takes of these donation shelters.
Hi Steve:
Your coments (113) is very interesting. I received the audit questions from CRA on COIP donation I made. COIP also sent me the answers for review. However, there are few questions that printed in green have to be answered by ourselves. They did not provide the answers. These aret the questions related to the loan program (1st loan and 2nd loan). Do you have any suggestions as to how to answer these questions? I’d like to know the link site that can help me on this or if you can help me. I don’t want to answer incorrectly so as to allow CRA to nail me. Your help woudl be greatly apprreciated. Thanks.
Please see above my comments (115) to Steve. Anyone else who can help me would be greatly appreciated. Thank you very much.
@ Canadian Capitalist
Canadian Capitalist – it’s not my opinion that any tax shelter program running in Canada now is not a leveraged cash program. It is a fact.
If you read carefully from your first comments, you use the term “leveraged CASH”. I replied that all of the new programs are not leveraged CASH programs and that they are warned against by the CRA. They are not done anymore.
Now you say that it my opinion that these new programs are not “leveraged schemes”. This is completely different wording on your part.
The CRA warns against leveraged cash programs. They do not warn against leveraged scheme programs (your terminology).
#14 on the Taxpayers Bill of Rights states that Canadians can expect the CRA to “warn of questionable tax schemes in a timely manner”. They warn against 3 types of structures:
1) Gifting Trust Arrangements
2) Leveraged Cash programs
3) Buy low/donate high programs
No warning of your term of leveraged schemes. Any program where you borrow to donate is a leveraged scheme. If you borrow to put into your RRSP you are participating in a leveraged scheme.
In order to discuss these very important legal tax issues on this forum, I think it is important to use correct terminology so as to convey the proper laws to the readers. You can’t use layman’s terms loosley & try to apply them after the fact.
We have to listen to the CRA here as they are the ones who do the proper warnings and they do not warn against borrowing to donate.
My wife, my mother, my brother, my cousins, my uncles, & many friends & family have been participating in the aforementioned programs every year for the last 4 years. We participate with our heads up & our eyes open. We choose to look at what the law says & not what people “think” they know based on incorrect information.
The CRA gives Tax Shelter ID#’s to allow companies to operate & people to participate, but they refuse to say whether they think the program follows the tax law as to do so would be suicide. If there is a problem with a tax avoidence program (which is perfectly legal to do, btw) and they say where they feel the problems lie, then they give people the roadmap to fix it. If they say they feel it works, then everybody in Canada would do it without fear & the country would lose too many tax dollars.
I suppose the CRA feels it is too difficult or impossible to change the law if they feel there is a problem, so I guess they really have no choice but to audit & reassess everybody who participates in ANY tax shelter – good or bad. When this happens, it doesn’t really matter if the tax shelter actually works or not as the hassle is just too much for most people.
My mother is 68 years old & she sleeps well at night after participating year after year as she knows the parameters & the law. There has only been 1 tax shelter arrangement that I know of that has actually “lost” in court after the audit & reassessment – Klotz & Nash. The reason I say “lost” is that the court found that the taxpayer’s receipt should be reduced to the amount the donor actually paid for the art, instead of the higher price they claimed as the “value”.
Cost = receipt amount.
It is exactly that premise that all the new programs are based on.
Canadian Capitalist – you said to me that, “It is your opinion that the donation programs mentioned are NOT leveraged schemes. In my opinion, they clearly qualify as “limited recourse debts”. Credit card debt is not limited recourse — the only way to get out of it is to repay the loan with all interest due.”
First of all you refer to a “leveraged scheme” and then you imply that these programs are not leveraged schemes because they qualify as a “limited recourse debt”. First of all, we were discussing what the CRA warns against on their web site, which is a “leveraged CASH” program vs. your term of a “leveraged scheme”.
To put that one to bed – cash has to be lent & then a portion of it invested in a plan to grow the money to pay off the debt. This is not present anywhere in Canada anymore as the guarantee of the investment constituted a limited recourse debt as there cannot be a “guarantee or covenant” that the debt will be repayed without full recourse to the borrower.
Now, if you are comfortable with the proof above that leveraged cash programs are no longer offered, we can move to the new programs, where I think I see where you were trying to make the connection.
You feel there is a limited recourse debt (nothing to do with a leveraged cash program) and feel that a credit card transaction is different because “the only way to get out of it is to repay the loan with all interest due”.
If I understand you correctly, then you are saying IF the programs in discussion were to have people repay the loan with all interest due, then you would concede that it is okay – just like using a credit card is okay.
Perfect. That’s exactly how they work. Case closed. We’re on the same page.
The fact that you didn’t know this goes waaaaay back to my original thread where you don’t know how the program works!
Please find someone to show you how these new programs work so you can see the interest paid, the debt repayment in full, etc. They are NOT even tax shelters – they are tax deferrals.
You mean to tell me that you didn’t even know that the thousands of participants have a big debt to pay back in the future? You didn’t know that they haven’t even finished paying off their debt yet?
Canadian Capitalist, it would really be best if you actually see how these programs work BEFORE making statements about them. It’s simply not prudent.
Please understand – you seem like a very nice person & I know you are trying to help people on this forum, but when I’m talking about one thing & you are discussing something completely different because you simply don’t know or haven’t checked it out fully, it makes it frustrating for me & impossible for people on this forum to get the right answers.
Let me know if you would like me to arrange to have somebody from one of these companies give you a presentation – I guarantee you will come back on this forum & say things that will actually be based on real knowledge. I guarantee that you will at least have a complete understanding of everything.
With good intent,
Steve
P.S. – I am not a principle, nor have been a principle, of any tax shelter company that has or is presently operating, but I do refer people to the better programs.
P.S. – We already know the “view” the CRA will take of these shelters – they will challenge everybody who participates! That’s what they do. That’s also why it is NOT a reason on which to decide if a program follows the law or not or whether you should participate.
@Steve: Thanks for clarifying that you are not a principle in any tax shelter. But the intent of my original question was: Do you receive compensation for “referring” people to the “better” programs?
“If I understand you correctly, then you are saying IF the programs in discussion were to have people repay the loan with all interest due, then you would concede that it is okay – just like using a credit card is okay.”
I’m not conceding anything of the kind. There are two parts: (1) the charity must be legitimate (not simply be registered with CRA; most of the donations should go towards charitable causes) and (2) If the money is borrowed for the donation, there must be a clear requirement that the principal and interest owing must be repaid. Borrowing from a credit card or line of credit satisfies (2) because failure to repay has dire consequences. The credit card company does not care about (1). It is the donor’s responsibility to make sure she is picking a legitimate charity.
You contend that these new schemes satisfy (2). You are saying that participants in these new types of charity schemes have a big debt to coming due in the future. Here’s my question: Does this loan show up on their credit report? How do these programs make sure that they collect the loan? How are these loans made in the first place? Do they run a credit check and charge different interest rates for different risk profiles? Are they secured against property of some kind?
You can argue till you are blue in the face that all these schemes are perfectly legal. CRA might take a different view. My bottom line is the same: if it’s questionable, why get involved?
@ Canadian Capitalist
Now you are talking about 2 new elements. I’m answering each concern concisely & you are rebuting with new problems. Each area is a different one to address.
Now you’re talking about legitimate charities, most of the donation going to a charitable cause, & clear requirement that the debt must be repaid.
Once again – in all of the new programs MONEY IS NOT BEING DONATED. I don’t know how many times I have to tell you this before it sinks in.
If you are concerned about charitable works, then you should absolutely love these programs as 100% of the donation goes to the actual charitable works and the charities have an OVER 100% disbursement quota. I know you may not know what the latter means, but it’s the reflection of received donations to charity v.s. what they receipt for the received goods.
Charities in the newer programs receive goods from the donors, not cash. Physical, touch them, heavy to carry, gifts-in-kind items. Yes, you can do that. Yes, it’s legal. Yes, that’s how these programs work. Please do not refer to these programs as donating cash again – it’s simply false.
Because people are buying AIDS medicine & giving the physical goods to charity, the charity CANNOT misappropriate those goods or misspend the donation on booze or cigarettes, right? Because it’s buckets of life-saving pills, only people with AIDS can really use them & Canada does not have an AIDS epidemic, so there’s no black market for the charity to resell the pills. 100% of them go to dying people in Africa #1) because the charities have forensic audits which have been supplied to the CRA at their request to prove this has been done & #2) it just doesn’t make sense for the charity to keep them!
There are 4 parts that dictate whether a debt is limited recourse or full recourse:
1) The debt must be paid back in 10 yrs
2) The debt must bear an interest rate charge that is not less than the government’s prescribed amount at the time it is taken out
3) Interest on the debt must be paid not longer than 60 days after the end of the each year
4) There can be no covenant, guarantee, or indeminity to forgive the debt (i.e. – the debtee must have the full legal right to come after the debtor if the debtor defaults)
According to the law, a credit check does not have to take place – only the 4 things above.
This is further evidenced by the fact that I can borrow $100 from you, use it to buy $100 worth of AIDS pills, donate it to charity & receive a receipt for $100. The law does not require you to do a credit check on me to ensure the loan is “real”, only that I pay you in accordance with the 4 rules above.
The law does not discriminate against people who have poor credit who want to donate to charity.
Failure to pay having “dire consequences” with regards to donations is not a legal term, nor has any legal bearing. But, if you do feel that it is necessary from a moral standpoint, then I’m sure you would concede that a lawsuit for tens of thousands or hundreds of thousands of dollars would be more “dire” than a black mark on your credit score by Visa, right? Once again, if we go by your requirements (which are not based in law) then we’re covered as there will be much worse dire consequences if anybody defaults on their loans – just wait & see.
Regarding your statement that it’s not enough that the charity be registered with the CRA – legally,you are wrong when it comes to the validity of the tax receipt as this is actually the ONLY thing that matters when donating to charity for tax purposes.
Now, if you are meaning morally & ethically, then yes, I agree with you and once again that is why charities with higher disbursement quotas prove that they are meeting their charitable mandate better than other charities (i.e. – more donations are reaching the cause rather than going towards admin, etc.).
Based on your own wishes & determining factors, you mentioned above, you actually prefer the charities involved with these new programs as they exceed all of your expectations. Simply check out their T30-10′s. (i.e. – the charity’s tax return, which proves it as plain as day)
Regarding your last statement, “You can argue till you are blue in the face that all these schemes are perfectly legal. CRA might take a different view. My bottom line is the same: if it’s questionable, why get involved?”
I agree that is a personal decision for each person. I do NOT think that tax shelters are for most people, only about 20% of the population (my guess). Tax shelters which are based in law should only be participated in by people who feel the law is what matters in Canada over and above the CRA. Because the CRA forces this situation on the taxpayer simply because they are trying to save taxes (which is our right by law as Canadian citizens otherwise Tax shelters would simply not be allowed & the CRA would not issue tax shelter identification numbers), that should not be a reason not to try & save taxes if the program follows the law.
What evidence have you received from a court that ANY of these programs do not work according to the law? I have received none. Please give me a court precedent, a policy in the income tax act or a provision in the income tax act that says so. Nobody in Canada has been able to, so what makes you think it will happen? Certainly the CRA has not proven this in a court of law.
If all legal costs are paid for & nobody in Canada has found a problem IN LAW with these programs (the only thing that matters from a legal standpoint & we’ve already covered the moral context), then CRA’s feelings on the matter to me are inconsequential. They can’t throw people in jail & they have to follow the law whether they like it or not (they don’t!).
So, yes, if you feel that the CRA runs the show here in Canada & you can’t think logically & you are fearful because you do not know your rights & you feel Canada is like Nazi Germany, then PLEASE DO NOT PARTICIPATE in any of these programs. You will be saving us valuable reading time on these forums.
If you feel confident in the law & you know your rights & you have checked out the charity’s T30-10′s and you pay back your debt in full accordance with the law, then by all means – participate if you wish.
Steve
P.S. – I do not receive commission for referring people to these programs.
P.P.S. – I just realized why you were asking about commissions! Don’t worry, there are NO fundraising fees charged by the tax shelter companies to the charity. This would not work as the charity is not receiving cash donations (only medicine), so they couldn’t afford to pay any fees anyway.
People in these programs earn money from the companies who sell the pills – the only for-profit entities in the mix. Think of it like the salesperson working at Futureshop where somebody buys a TV to donate to the Salvation Army. The person who sold the TV got paid their commission for the sale.
Again, fundraising fees to the promotors of tax shelters is an antiquated system that has been abolished with the new programs. They simply don’t need to work that way anymore.
@ Ravi:
The reason you got the questionnaire is because your SIN has been linked to the tax shelter ID#. What are you afraid of? You should fill out the questionnaire and return it to CRA. You did not claim the donation credit for that year and carried it forward. What can CRA do to you, other than deny you the donation credit. They can’t apply interest or penalties since you did not claim the credit. 100% of nothing is still nothing. Don’t lose sleep over it.
@ William:
Please share the outcome of the Barter World settlement. How many ways can you skin a cat? I think Steve has done a great job of explaining how the program works.
The questions in green tend to relate to how you filed your taxes. As such the person who prepared your tax return would be the best person to help you answer those questions. If you are still not able to get it done, post email where you can be reached and I’ll see if I can help.
Remember we are governed by the rule of law. CRA will interpret the ITA in what ever way that benefits them, the same goes for the taxpayers. It is not the person who understands the law the best that will win, it is the one who best prepares their case.
@Steve: We’ll see what view CRA takes of some of these tax shelters. Personally, there are so many ways to make money. IMO, participating in dodgy charity schemes isn’t it. And I don’t take the view that CRA is some sort of Gestapo. I personally agree with their view that charity schemes are an abuse of the tax system.
Alnaexan:
I would appreciate it if you could provide me some ideas of how to answer these questions in green. I would assume that you know these questions too if you participated the COIP program. My email you can contact me is wwchu926720@hotmail.com. I am the one filing the taxes myself, but I really don’t know how to answer these questions. Your help would be very much appreciated.
I’ll find out more information on Barter World and will let you guys know. Thank you again in advance Alnaexan.
Any “charity” where you are getting more back than you should is questionable. CRA can and will go after this.
Also, the deceptive COIP information site tells you to take out a loan for the amount, and seemingly refinance it perpetually. So, off a 6700 dollar donation, you’re only really getting the 46% credit based on it’s numbers.
They use deception to try and trick those who aren’t reading it carefully.
What screams bs to me is that they want you to finance the loan through them, it seems. So they’re taking your money for the donation, as well as taking your interest money, and pretending to be a charity.
@ Canadian Capitalist & Common Sense
This is where your problems lie.
That is not how the COIP program works. COIP has never pretended to be a charity. They sell medicine to people who donate it to charity. The charities are completely different entities. Didn’t either of you read my earlier blogs?
I agree with Common Sense – any “charity” where you are getting back more than you should is not only questionable – it’s against the law!
Again – the COIP program works EXACTLY like a Visa card – IT’S A TAX DEFERRAL PROGRAM, NOT A TAX SHELTER. They have to get a tax shelter ID # regardless because the CRA forces every program regardless of structure to register or face $5000/donor penalties.
Common Sense – you ONLY get a tax deduction for the amount you paid for the medicine. What you are missing big time is the fact that COIP is not a charity & you are paying COIP off over time & not right away.
Based on your flawed logic & gross misunderstanding of this program, you are saying that if somebody donates $1000 on their Visa card and gets a tax deduction for 46% ($460) immediately then they are participating in something “dodgy” if they haven’t paid off their Visa as they got more than they “put in”. Ridiculous.
Canadian Capitalist – again, you refer to the CRA’s “takes on some of these shelters”. Of course they don’t like any of them! That’s my point. They can’t like any of them. My point is that there are NOT many ways to save taxes in Canada, that tax avoidence is perfectly legal by law and you know it. Where we differ is on the point that you say you will not do anything that the CRA has yet to prove in court nor warns against (that’s right, the CRA does NOT warn against the COIP structure in any way shape or form) due to what you read about in the newspapers and I base my decisions on what the law says. To each his own. Good luck with your financial future & please share with the rest of us “common folk” all of the great tax strategies out there. BTW – we already know about the other tax shelter out there called the TFSA. It’s really great.
You two have failed to read or chosen to ignore my accurate information and keep reiterating stuff that is not at all true. COIP a charity? Come on – please show me where COIP is registered with the CRA as a charity. Surprise – it’s not.
Ask yourself a quesiton – if the law is so clear in your mind that these programs simply can’t work, then why are they still operating? I suppose you feel that our government is powerless to do anything. I’ve got news for you – they haven’t done anything because they can’t as tax deferrals are perfectly legal.
Guys, it’s been fun, but I can’t keep coming back here to tell you that your understanding of these programs is innaccurate and to tell you over & over that I agree that the CRA will challenge ALL of them. It’s been said over & over.
I wish you the best in your financial/tax lives and I beg you to NOT participate in any government registered tax shelters EVER. You will be doing yourself a favour.
Sincerely,
Steve
On November 17th, the Tax Court of Canada ruled on Marechaux v. the Queen – a leveraged donation scheme from the early 2000′s.
The court nixed the scheme and ordered Marechaux to pay the costs of the legal battle.
The legal basis for the conclusion is that the taxpayer did not make a charitable “gift” because he received a benefit in the form of an attractive financing arrangement. While the specific details are somewhat different, Steve’s “tax deferral” program creates a debt owed to COIP that I’m not sure how you ever pay off. If you don’t pay it off, that sure sounds like a “benefit” which would disallow the medicine that you donate as a “gift”. If you do pay it off, it is hard to see how you have gained anything from the whole exercise.
There was no issue of whether it was a leveraged cash scheme or a leveraged something else scheme. the court also commented that it was wise that the taxpayer didn’t argue that he should get a donation receipt for at least his cash contribution portion because it was part of a large transaction that cannot be broken into pieces arbitrarily. (In other words, don’t bank on getting at least a partial tax receipt even if you eventually lose the court case.)
For anyone who wants to take the time to read the actual decision, I googled marechaux v. the queen and the charity law site had links to the actual decision.
There are a number of other legal arguments that were not used in this case which may also be available in future court cases so please don’t think that this is the last argument for the crown to use.
Thank you, Canadian Capitalist, for trying to help people from being taken advantage of.
The court has said to make your charitable contributions for charitable purposes rather than to get a benefit for yourself. Banking on long delays, possible future settlements at 30cents on the dollar, waivers of interest and penalties is foolish. If you don’t like paying taxes, invest in an RRSP or some other above-board option. Playing games with the tax system is probably going to leave you with a bad feeling in your stomach and quite a few dollars poorer.
And Steve, you said you weren’t a principal and you also said that you didn’t get paid commissions recommending these kinds of schemes. You didn’t answer whether you were an employee (for example, the vice-president of marketing).
@Scott: Thank you for the Marechaux v. The Queen case. It is a fascinating verdict that did not even test the GAAR rule. So, it could take up to 8 long years for these things to be decided and participants in donation schemes have to wonder about the penalties, interest and court costs. Wow!
Apparently, the scheme was pitched with a tax opinion that the risk of a challenge by the CRA was “slim”. Sound familiar?
http://www.globalphilanthropy.ca/images/uploads/F._MAX_E_._MARECHAUX_v_._Her_Majesty_the_Queen_.pdf
Yes, it sounds very familiar.
I attended a Missionlife presentation a couple of months ago to confront them about this tax scheme they were promoting. I wasn’t impressed with their newspaper ad suggesting that the government and big banks were in a conspiracy to keep people poor and that they would be telling you about things that their accountant wouldn’t/couldn’t.
Let’s see, listen to the smooth talking salesman in the expensive suit who makes money from getting you to buy what he is selling, or listen to the trained professional with a code of ethics who has no financial interest in having an opinion in one particular direction or another? Tough call.
But boy they were smooth – they probably learned their presentation skills selling Sham-wow. I wonder if Darren Weeks, the presenter, should start referring to himself as the “Sham-Rich Dad” instead of just the “Canadian Rich Dad”?
I didn’t come back here to continue with any of the previous threads, but simply wanted to show everybody an interesting article in Money Sense Magazine.
Just so everybody has can see the power of gift-in-kind donations and how proper donation tax shelters promote huge philanthropy with $0 going to the companies and 100% going to the charities (unlike every other tax shelter program in the past), take a look at how one of these companies has single-handedly propelled their recepient charity to the #2 spot in Canada.
This article in the December issue of Money Sense Magazine used data compiled from our own CRA.
http://www.relieflendinggroup.com/WYSIWIGUploads/image/MoneySense_HEDAC.jpg
The disbursement quotas of these charities speak for themselves. The facts & the law are indisputable. This is to prove to you that in all of the newer programs, there are REAL charities who receive REAL goods that people buy & donate. Exact same program as Mission Life, by the way. You will see the charities working with that “Sham” become the best performing charities in Canada very soon – it can’t be helped. It’s the nature of the program.
Now, before I get swamped with more notes about how it doesn’t matter & that the CRA hates us all and how everybody will be in trouble for participating in tax shelters regardless of whether they are real & follow the law…
I AGREE WITH YOU.
I just wanted to show you one small reason why they are the real deal & should win in court down the road after all the huff.
Wishing you all a Happy Holiday!
Thanks Steve,
Happy Holidays
Thank you Steve.
HEDAC
Registered as a charity in 2007, no revenue, no directors listed.
In 2008, it supposedly brings in $60,691,943
Most of it it sent outside Canada $58,743,500
However, bringing in $60 million, doesn’t mean they actually got that money.
It means they issued receipts for $60 million. Since most of it went outside Canada, or it was gifted to another charity, it’s difficult to determine if they actually ever had $60 million. Is it possible they issued receipts in return for the $444,696 they received in fund raising revenue? Who got the $ 1,516,066 in professional and consulting fees?
Its humble website hides the fact that it is one of Canada’s 40 BIGGEST
charities. No glitzy pictures of philanthropic executives. No faces, or names.
http://www.hedac.com
The article just came out in December’s Money Sense Magazine, but even if they had more time, I don’t think it would be their goal to splash that all over their web site. They don’t get their donations “off the street” like other charities.
They did NOT RECEIVE CASH for 99.9% of their receipted donations, so no cash could be misappropriated. They received medicine which was purchased & donated to them. All the data and undisputable proof comes directly from the CRA’s own stats & audits, so it’s 100% correct. We’re talking about DISBURSEMENT QUOTAS here, so don’t get confused about what comes in the door to the charity – it’s all about the ratio of what comes in v.s. what goes out & this charity sends the 2nd highest % of donations out in Canada.
Yes, I agree with you that it is refreshing not to see pictures of flashy philanthropic executives – this charity is for real and it achieved the 2nd best disbursement quota in Canada through receiving gifts in kind & NOT CASH. In fact, that is the only way they COULD achieve it. And it was achieved almost entirely through the efforts of a company that had to register itself as a Tax Shelter with the CRA. Talk about ironic…
This may all end up being legal due to loopholes in tax laws. Its a complex scheme with registered charities, travelling salesman and off-shore investment companies. Its pretty tough for CRA to prove or disprove the existance of drug “credit units” held in a private investment company based out of Costa Rica.
But lets be honest about this people, legal or not, your buying bogus receipts to save on your taxes.
There is no charity, just profit. After your entry fees have been divied up to cover airfare, venues, dinners, salaries, loan fees, commisions etc. Do the math. It doesn’t add up. There’s not much left over to go to charity.
Consider that you might be buying your receipt from a pimp.
PIMP: a man who solicits for a prostitute or brothel and lives off the earnings
http://www.thestar.com/news/investigations/charities/article/624338–sex-and-charity-james-arion-profits-from-both
COIP is not a charity. It is a company formed to act as a fundraiser for charities. They are the travelling saleman. At the end of the day, they can claim they didn’t really know what was going on in the charity. They didn’t break the law, they didn’t issue the reciepts.
You got no recourse against them as they have told you from the begining that this may not be accepted. When you get legal forms from CRA, they say “No problem, send them to us” You have no idea if your legal issue has been resolved. I would take them to an independant lawyer.
When it falls apart, all you got from HEDAC is a reciept that you can’t back up with a cancelled cheque, and a phone number that doesn’t even reverse lookup. When you go look for that phone number, you may find the website is gone, just like the Orion Foundation’s.
COIP? Well it looks like they are trying to disappear too. Its now Mission Life Financial. The charity is now ACTLAP. The names have all changed, but the deal looks pretty much the same. A Glossy brochure of smiling kids in Africa. Doesn’t it just warm your heart to know your doing so much good. And you get a TAX rebate too WOO HOO!
Skeptical, with all due respect. I don’t think you know how these programs work. There’s no money being donated as the main donation, my friend. COIP & the other companies are NOT charities & that “Pimp” guy’s charity has never had any problems with the CRA. They are still registered in perfect standing and have amazing disbursement quotas too.
I think you may have fallen into the trap of seeing (& believing) things that have no bearing on the law or the charity being done.
Receipts can’t be “bought”. If they did, the charity would be shut down, not featured in Money Sense. I know this because the COIP & RLG charities are the ONLY charities from ANY of the tax shelter programs of the last decade that have NOT been shut down. Think about it. You’re missing something.
You should have gotten a receipt from HEDAC and you can easily back that up as you DO make a donation of cash to that charity. Cancelled check backs it up easily.
COIP, RLG, & Mission Life are all still around & are not disappearing. They may not offer programs in future years because after the programs are reassessed (even though all participants know & expect this) by the CRA, it makes them harder to market. Victory for the CRA on this one.
All this being said, even good donation tax shelters are not for everyone, so I completely understand why you don’t feel comfortable, but for many people they make sense if you know the law and you can stick to it when rationalizing the programs & the series of events that follows after participating. It really is the ONLY thing that matters.
Just because a charity is still registered, doesn’t mean there are no problems with the CRA. The CRA will not tell you who they are investigating until they are revoked.
I understand it. This is all completely legal. COIP told you from the beginning that your claim may be rejected. They showed your the CRA warning. They told you to have it reviewed by a lawyer or accountant. They said you might have to pay the money back. COIP is covered legally.
The claimant should be ok too, up until a time that CRA deccides to do something about it. Might never happen due to the backlog of cases this has created.
Its all legal until the claim is rejected and you don’t want to pay the money back.
100% right. Finally, somebody who really “get’s it”!
It’s cool to know, however, that the stats used to formulate the charity ranking did not come from the charities. It came from the CRA. So, if there is something wrong being done by the charity, they are hiding it very well. Forensic audits done by the CRA simply don’t lie.
P.S. – Even if the claim is rejected, you still do not have to pay any taxes the CRA feels you owe. This is where most people fail in their understanding. I’m not suggesting you are one of them, but it’s important to remember that a simple NOO will put things to court & as long as somebody else is paying the court fees, then it’s only what a judge says that matters. THEN, if you don’t pay (assuming you don’t take a deal from the CRA before hand and actually lose in court after 1 or 2 appeals) you can get in trouble. By the same token, if you decide to pay the CRA the disputed amount and THEY lose in court, then they have to pay you plus interest, etc. and can get in trouble if they don’t. But I’m sure you already know this.
No, you don’t have to pay, you can appeal. The promoters want to brush this part off as no big deal. “No Problem! We THINK your going to win.” At the end of the day, they don’t care if you win. That’s your problem! They’ll move onto the next customer.
Anyone I’ve ever talked that has been raked over the coals by CRA considers it a stressful and financially painful experience. It is a fight to the bitter end.
The promoters, on the other hand, are making millions.
http://www.thestar.com/business/article/754726–daw-suit-claims-charity-sham-misled-taxpayers
@Skeptical: I completely agree with you. The simple fact that a donor can make what amounts to a $1,000 out-of-pocket “donation” and get $1,500 or whatever back from the CRA doesn’t pass the sniff test. Steve will tell us that he isn’t affiliated in any way with any of these donation schemes and then upload a MoneySense clip to Relief Lending Group website.
“The promoters want to brush this part off as no big deal. “No Problem! We THINK your going to win.” At the end of the day, they don’t care if you win. That’s your problem! They’ll move onto the next customer.”
I do wish that potential donors to questionable charitable schemes will pay heed to this. Sadly, greed blinds many to the obvious risks in these schemes.
Gents,
No question over the years there has been many questionable tax reduction schemes. I have been considering the Mission Life/COIP shelter. Tax shelters are allowed under Canadian Law and at first “sniff” this seems to comply with the law. That said CRA will no doubt have a go. An over riding theme in this forum seems to be the belief that CRA make tax law. They do not, although they do feel they have that right. CRA simply administers the tax act. The government makes the law, the courts interpret it, the CRA administers it. CRA likes to put out “interpretation bulletins” Ironically these interpretations may be completely different, on the same subject depending on the regional office that put it out. I have in fact won a victory (admittedly on a small amount) when I pointed out an interpretation that differed from a different region. It is interesting (sad actually) that CRA auditors are paid a bonus on “extra” money they collect. In other words they are motivated to wring the most they can out of us, by using these interpretations and refering to them as “the Law” They send letters demanding payment adding huge intrest and penelty charges in the hopes you cave and pay. You only have to look at earlier posts to see the fear and worry.
Now I’m not promoting this COIP or any other shelter but the attitude of.just buy your RRSP and pay us the rest like a good little Canadian least we have to threaten you really is….so Canadian. Don’t buy into these things if you don’t want to, but do that because you have done the homework, not because CRA may not like it, of course they don’t like it, they don’t like us to have any of our money.
Another note, just as it seems some here might have some relationship with a particular tax shelter so it also seems some work with/for the CRA.
@cxflyer: Let’s set aside the debate over whether folks who want to avoid donation schemes are scared of the CRA or not. Let’s look at it from a purely financial perspective.
You make a $1,000 “donation” to a charity scheme and expect $1,500 back from the government.
There are two possibilities:
1. These donation schemes are deemed legit and you have a 50% profit to show for your troubles. Let’s be charitable and say the odds of this happening is 50%.
2. CRA challenges the donation, denies it, you object, it ends in tax court and you lose. Assuming you didn’t have to pay any penalties or interest, you have lost your $1,000 “donation”.
Your expected return from participating in a donation scheme is $1,500 * 0.5 – $1,000 * 0.5 = $1,000.
The trouble is I don’t think the odds are anywhere close to 50-50. It’s more like a 10% chance of getting away with it or less. At those odds, your expected return is a loss of $750.
That’s why I think these donation schemes make no sense whatsoever. I like to reduce my taxes as much as the next person and there are many legitimate avenues available that have much better odds of success.
cxflyer: Are you calling me chicken? Who do you think I am? Marty McFly? Is that supposed to make me stand up to those Bullies at the CRA? I’m not 12. I make my decision based on facts, not emotion.
The fact of the matter is that these people have NOT donated the money they claimed on their taxes. That’s why its being disallowed.
I would like to point out one other small detail in the Banyan Tree article.
Not only do these people have problems with the CRA, Robert Thiessen is calling in his loan. These people are getting screwed from both ends.
Skeptical – In the 3 programs under discussion here for the last looooong time – NONE of them have money as the donation to charity in which they get a receipt, so that is NOT why they are being “disallowed” (by the CRA of course, & not by a court of law). You should know this. This is why the HEDAC charity is #2 in Canada – because the donations are of medicine & that is why they give 100% of the medicine away – because it’s NOT money, which can be spent or used in any way by a charity based in Canada, where there is no AIDS crisis.
Canadian Capitalist – This is a forum for discussion. Quit trying to make it personal. You may as well call me a liar. I told you I am not a principle, nor an employee, nor an Agent for any of the aforementioned companies. I am friends with the companies, I promote the companies, & my friends & family participate in the programs. Don’t keep implying that I own one of the companies. By the same logic, ex-flyer has a good point – that you are working with the CRA. Get over it & don’t be a dork.
Not one person has:
1) Shown me that they know how these programs works (ie – no money donated & no inflated receipts for “cash”)
2) Shown me any court precedent, policy, or provision in the ITAC that would serve to disallow the tax deduction entitled to the donor (Banyan Tree doesn’t count as it is completely different with the donation of cash & not one of the aforementioned companies that accept only goods, not money)
Nobody has disproved that HEDAC charity, which was recognized by the CRA and Money Sense Magazine to be the 2nd best performing charity in Canada. (No, Canadian Capitalist, just because I say that, it does not mean that I work for the charity.)
Guys, you’re not addressing the discussion accurately. People participate in these programs:
1) Knowing that they will be challenged by the CRA
2) Knowing that the companies make money from the goods they buy & donate
Who are you to blame the companies for problems not yet proven to be problems in a court of law? Or do you think the CRA is the law? We don’t live in Nazi Germany anymore, guys. Why aren’t you directing your negative Nelly attitudes towards the CRA? They are the ones who “let these terrible programs continue”. They are the ones who refuse to give an advanced tax ruling on these structures. Ask yourself why? Really. Think about it. Why condemn companies that jump through all the appropriate CRA hoops & register for a tax shelter ID, & even ask the CRA to tell them first whether they think the program follows the law. The CRA has an agenda & this clearly proves it. It would be so easy for them to tell us whether a program “works” or not. Why don’t they do it? You know why – because all they need to do is say that one program works & they would lose too many tax dollars even if the law did allow it. The CRA has given these companies no choice & you know it. Now you blame the companies – shame on you. Call me wrong after 10 yrs when court decides that I’m wrong, but not until then. (No, Canadian Capitalist, just because I talked about Nazi Germany a few sentences back, it doesn’t mean I’m taking a political stance. Sheeh, what can a guy say here without you suggesting an ulterior motive?!)
You are trying to “protect” people that know full well what they are getting involved with (or else they are not reading properly), who know that no court in the land has shown why they would fail, and who know the companies are getting paid. Get over it & come up with something relevant or even remotely intelligent that’s on topic.
Please, somebody come back & tell us all again how “people are getting fake receipts for money that was never donated” or that “Money Sense & the CRA could still be wrong about a charity’s efficiency”. Funny thing is that you probably will…sigh…
Yeah, Yeah, big complicated scheme involving shell companies, shell charities, off-shore lending companies, etc, etc.
Let me simplify it.
First of all, I don’t care whether you want to call it cash, dollars, gift in kind, or drug credits. Its all the same thing. There all supposed have a cash value equal to what you claimed.
PART1:
You give X dollars.
Smoke and mirrors to delay the CRA
You get receipt for about 6X dollars
You claim this value on your taxes for a refund.
CRA automatically issues a refund for 2X dollars.
Yay! You’ve doubled your money.
PART2
CRA audits you.
CRA disallows claim for 6X dollars, because you didn’t give 6X dollars.
You pay back the 2X dollars, or you fight in court.
PART3 – Hasn’t happened yet, but probably will.
The promoter is charged with fraud as millions of $ of charity money vanished.
The promoter has to come up with something to cover his butt.
Promoter calls in his loans.
So I encourage everyone to read the fine print on those loans. Keep you eyes open for a clause that says something about under performance of the investment. You may still be on the hook to cover the loan.
*————————————————————————————-
Its been fun Steve, but I’m not making any money off this conversation so I’m probably going to let it die. If I really wanted t make some cash off this, I’d probably sign up to be an Ambassador. At the end of the day, the only guys that profit off this will be the promoters.
Hahah Great emotion guys(girls) I actually agree. I would not “invest” in any of these as there is no question CRA will find fault..justifiably in the setup. They are at the end of the day a tax ponzi scheme. The real fault however lies in the CRA /Govnt not just shutting it down immediatly. Make the process of getting a TSIN harder. Pre approve the plan so these snake oil salesmen can’t grab the uninformed/greddys money.
@Steve: If you are “friends” with these companies that is an affiliation. You are not here out of the goodness of your heart, you’re drumming up business for your “friends”. So, you are not exactly a neutral observer here and someone reading your comments should be aware of it. It’s nothing personal, strictly business.
I suppose this thread is losing relevance. I’ve already pointed out why I would avoid these schemes. I have no idea how CRA will go after these arrangements, only that there is a significant risk that they will and participants face the risk of the donations being denied. That’s enough for me to stay away and I’ve pointed out that it should be enough for most tax payers as well. I have no interest in getting into a debate on whether CRA are like the gestapo. In a strict financial sense, the upside simply doesn’t justify the downsides. Your mileage may vary.
Aaaargh…
No investment.
No charity money disappearing, cuz there’s no money to disappear.
Skepical, your comments have no logic. You’re just throwing things out there that have no relevance. Of course there SHOULD be a clause that states that you have to pay 100% of the loan back. That’s the point, my friend, there is a real debt that has to be paid back & these programs are not even tax shelters! They are deferral programs that in no way give you a ride for free. In these programs, everybody is told that they have to pay back their loans. That’s what makes these programs real & why the CRA has no leg to stand on. It’s the programs where you get something for nothing that raise eyebrows, not the ones that work like a credit card, where you buy something on credit & pay the debt back in full at a later date. This just shows yet again that you do NOT understand how these programs work (I thought you did) and yet you & CC are trying to tell people they don’t work based on facts you continue to show people that you get wrong.
In ten years NO promotor has gotten “in trouble”. That should tell you something.
HEDAC is the #2 performing charity in Canada as verified by the CRA and Money Sense. That should tell you something.
The CRA cannot “shut down” these programs. That should tell you something.
Real loans that have to get paid back. That should tell you something.
I’ve given people law & facts that support my comments. You guys are giving fluff, inuendo, & speculation. You should do better or not comment at all. It’s misleading people.
Canadian Capitalist – OF COURSE I’m taking a side here, that’s what this discussion is all about. If I didn’t take a side, there would be no discussion. You’re absolutely right – if I wasn’t a fan of these programs, I would not be writing this, but that doesn’t diminish the fact that I’m pointing out things that are accurate & irrefutable, so don’t try to cover up your inadequate comments by sloughing it off to me being one-sided.
For sure these tax shelter programs are not for you guys, but you are simply not qualified to give other people “advice” on stuff you continue to show clearly that you do not know about.
Guys, I’m sorry if you are feeling upset or frustrated by this thread, but I am too. I’d love to go for a coffee & show you how things work so you have a better understanding. I can guarantee that you will agree with me after we talk. Or at the very least, see why these programs are different, with no smoke & mirrors & how they follow the law. We may still agree to disagree on some other things.
No, CC, I’m not suggesting we meet so I can secretly sell you one of the plans. I don’t even live in Canada. And I’m not suggesting a coffee because I’m a Tim Horton’s shareholder. No ulterior motive – I’m just really tired of having to correct you guys on what actually happens & it would be worth it to spend $5 on coffee & an hour of my time (excluding flight time to Canada) to straighten things out for you.
Despite my sarcastic comments, I really do appreciate the friendly banter & I enjoy the challenging conversation. I’m sure you guys are all cool…
I followed the COIP/MissionLife trail. I looked for the “charities” that actually pass out the drugs…nothing. One led to a loose association with a Kiwanis club in the east another to a church. Neither of whom have given any drugs to anybody. If the gvnt wanted to give me a 2 for one if I put money up to ship drugs to Africa they would do it simply not through third parties with complex schemes. In fact If I really wanted to give these drugs I could go and buy them overseas,cheap, and send them. It would buy MANY more pills per dollar, but I would only get a right off for the amount it cost me. I sat through the seminar, asked questions, many of which could not be answered like do you have a name and contact number for the person that is responsible for actually buying the drugs, and the name and number of the company that ships the drugs, and the name and number of the person that actually oversees the distribution. Funny, he didn’t seem to know that nor did he know how to get that info. Lest face it the Escort guy that changed his name and has been involved with COIP would not be allowed near a completely reputable organization. Maybe some drugs are getting to africa, good, but the paper trail to generate a leveraged position for tax purposes smells a bit. I don’t like CRA any better than anyone else but they can be a pain if you fall afoul. If this passes muster after CRA is done with it I’ll buy in because it is so good for Africa it will be operating for years to come, fulfilling Canadas aid commitments.
Steve: I’ll say it again. I don’t care whether you want to call it cash, dollars, gift in kind, art, computer software, books, or drug credits. Its all the same thing. They are all supposed to have a cash value. Its supposed to be equal to what you claimed. Otherwise it’s fraud. Right?
And thanks for straightening out that loan thing. I think that most of the people involved are under the impression that the loan somehow disappears. If you have
to pay pack the loan, well, that makes its a complete waste of time. That means you’ve borrowed money to give it away to charity at some point in the future.
That means your going to have to cough up the receipted value of 6X dollars.
Who would actually sign up for this?
That’s just stupid!
Interesting points. From what I understand from speaking with friends and associates that have studied tax law, the courts tend to favour a plain meaning interpretation of the Income Tax Act. In other words, precedent cases reveal that unless the ITA explicitly states one cannot do “xyz”, then one can do it. This sheds light perhaps on why, although the original ITA was only ten pages long and and was a war tax levy on certain incomes (it was passed on September 20th 1917), it has now swelled to being a few thousand pages long, as people have legitimately participated in legal tax avoidance (also called tax minimization or aggressive tax planning) as it is their absolute right to do so.
The CRA’s agenda, as cxflyer notes, is no less self-serving than taxpayers seeking to exercise their first right (See “Taxpayers Bill of Rights” on the CRA website), which states “You have the right to entitlements and to pay no more and no less than what is required by law”. I also know individuals that work as employees of CRA in the audit division, whose mandate is to collect ten times their annual salary as a quota or target. Those that succeed are promoted and/or entitled to bonuses (as would be expected for any employee thus incentivized to hit their target or otherwise do a good job).
As Steve explained until he was almost blue in the face, each tax shelter structure one considers must be understood. It must also be weighed against specific anti-avoidance provisions in the ITA, and as well, against the general anti-avoidance rule (GAAR). A good due diligence measure may be, if you are a layperson and are genuinely considering participating in a particular tax shelter, to pay an impartial tax lawyer their hourly rate to assess and give their opinion on whether the structure is built to be in compliance with what is written in the ITA. If it is, you might consider participating.
An important point no one has yet mentioned in this thread is the length of time it takes for a tax shelter (that has been reassessed by CRA, then objected to by the participant, then handed over to the tax lawyers), to move its way through tax court. This is assuming the tax shelter company one is dealing with has sufficient funds held in trust by a third party law firm to let the litigation and subsequent appeals run through the court system. The stats shared with me by lawyers who follow this process is that each tax shelter takes on average, between 7 and 12 years before a ruling or private settlement is reached. Here are more interesting stats:
Statistics on Tax Litigation
On November 22, 2009, at the Canadian Tax Foundation’s 2009 Annual Conference, Johanne D’Auray, Assistant Deputy Attorney General, Tax Law Services, Department of Justice, as part of the panel discussing current tax cases, presented some statistics.
OUR HIGH COURT SEEMS TAXPAYER FRIENDLY, IF YOU HAVE THE FUNDS TO GO THE DISTANCE.
· Out of 16,000,000+ taxable returns filed by Canadian tax-filers in 2009:
· Only 50,000 to 70,000 (out of millions of taxpayers) will object annually to the Appeals Branch.
o 92% resolved administratively, (taxpayers have to or choose to settle for administrative settlements before accepting the expenses that come along with appealing to tax court)
o 8% accept the cost and pursue an appeal to court
· Of those who can afford to start the court process:
o 1/3 cases are settled before court to the satisfaction of the parties
o 1/3 withdraw and cannot or will not accept the expense etc..
o 1/3 go to hearing and are able to bear the expense
o In Tax Court, some win and some lose, but
§ in 2008-2009 161 were appealed to the Federal Court of Appeal
· Of the remaining who can afford the appeals:
o 15% of taxpayers beat the Crown (CRA) in lower courts
o 28%* of taxpayers beat the Crown (CRA) if they can afford to cover the costs to appeal to the Supreme Court of Canada (*Note: 28% is based on all cases from 2003-Present)
What is also interesting to note is that interest and/or penalties, to my knowledge, have not historically been applied as a punitive measure against taxpayers, once the ruling or settlement has happened, regardless of whether the taxpayer was legally required to pay back any or all of their refund. If anyone can cite a specific case of where this has happened, please share it.
So, given the time frame of 7-12 years of having and making wise use of my tax refund ie. paying off my home mortgage years ahead of schedule, then re-routig the savings into prudent investments, or investing the refund in secure opportunities, or paying off high interest debt (and then axing the cards), even if the tax shelter is ruled against and 100% is due to be re-paid, I will be ahead after a 7 to 12 year period (assuming I am a good money manager and ensure the entire refund amount can be liquidated quickly should I need to pay an amount back). From where I sit, there is very little down side, and a lot of upside – the charity benefits, the taxpayer benefits, the tax shelter company benefits, and if the program ends up being ruled against as non-compliant, then the Ministry of Finance benefits from being paid back.
Thank you Andro, from preventing me from banging my head against a brick wall out of futility…
Skeptical – the donations are not supposed to have a cash value equal to what you claimed. You are supposed to claim your cost. There’s a big difference. Now, your cost can be what you pay now, or what you will pay if you use credit to buy it (ie – like a purchase of a good on a credit card that you donate). You then use the time value of $$ to take advantage of the immediate tax benefit NOW and pay the debt off later.
Have a wonderful weekend folks!
Steve: I think you are referring yo the Mission Life program when you say the loan has to be paid back.
This is different from the COIP program where you prepaid the interest on a loan. That loan is ultimately paid back with replacement MUs. There was no clear explanation where those came from. I have to assume that they are from follow up customers. This would make it a Ponzi scheme as cxflyer suggested.
The statement: donations are not supposed to have a cash value equal to what you claimed. You are supposed to claim your cost.
A gift in kind is supposed to be given a fair market value. If you gifted a Rembrandt that you found at a garage sale, you can claim millions on your taxes. It would be accepted if it was worth millions, even if it didn’t cost you millions. When I gift my old van to the Diabetes society, they give me a receipt for the scrap value. They don’t give me a receipt for my original cost.
Hi Skeptical,
Yes, the Mission program is a bit different than the COIP program, you are correct, but my point is that there is a debt to be paid back, whether money or in pills that cost money.
Actually, the Rembrandt example you gave is incorrect. If you found it at a garage sale & donated it WITHIN 3 YRS of acquisition, you can only claim the price you paid at the garage sale – The lesser of COST or FMV.
FMV “otherwise determined” (eg by appraisers, etc.) is determined by FACT, while FMV 1st & foremost is determined by cost, which is LAW (way better than fact as it doesn’t vary from appraiser to appraiser, who use methodology that differs). The example of your old van works in reverse as it’s the “LESSER of the FMV or Cost and of course your Van depreciated over time, so you received the lesser of what you paid v.s. what it’s worth now.
That’s a mistake that many people make, but if I bought the Mona Lisa today for $100 and donated it tomorrow, I could NOT claim the millions it’s “worth”, but rather only my cost.
This makes sense, if you think about it, as “cost” is relative, while “value” is not. If people donated & got the “value” for their donation receipt, then people could be doing illegal tax-sheltering like crazy:
Sony could donate laptops at their “value” ($2000) to receive 30% deductions ($600), while their “cost” to produce is only $400.
You could go to a factory warehouse sale & clean them out of their “end of the season” inventory at 20 cents on the dollar & then turn around & donate them at the ir full $1 “value”, claim the receipt of 46.40% and more than double your money.
Make sense?
No Steve it doesn’t make sense.
It doesn’t make sense because after giving me all these great examples, your going to say that this cost and value thing works everywhere except in the COIP program. In that example your going to tell me I can have a cost of $1400 and get a receipt valued at $6700.
That part doesn’t make sense.
Ummm…
No, I didn’t say that. Cost IS $6700. The interest paid on the $6700 is $1400 and cannot even be deducted as it is NOT the cost of the item.
Let’s tackle one thing at a time:
We were discussing COST v.s. FMV “otherwise determined” (i.e. – determined by appraisers) and I was showing you where it’s the lesser of cost v.s. FMV. You suggested that you can buy something for a low price at a garage sale, donate it immediately, and claim a much higher value on the receipt used for tax deductions and I said that you cannot do that.
You are now bringing up something different – purchases using credit, which is a completely different discussion. The interest paid on an item cannot be claimed or added to the price paid for the item.
If you donated $6700 on your Visa card and paid interest only for the time being of $1400, you would not say that you only donated $1400. By the same tolken, if you purchased something on credit for $6700 and paid zero principle and $1400 in interest, you would not say that you only paid $1400 for the item.
Big difference.
S.
“if you purchased something on credit for $6700 and paid zero principle and $1400 in interest, you would not say that you only paid $1400 for the item.”
If I don’t have to pay the principle and my total out of pocket is $1400, then I would say I paid $1400 for the item.
And what’s with that interest rate?
$1400 to borrow $6700 for 2 months?
Thats like 10% per month!
Thats like 312% per year!
Why don’t you use my bank?
I’m getting 3.25% per YEAR.
I could borrow $6700 for two months for less than $50.
Correction on the above:
It’s 212% per year!
Skeptical. Please address the issue & we can move to topic 2 & 3 in sequence.
You said you could claim “value” over “cost”. I corrected you. Now you are discussing what constitutes whether you have “paid” for something to validate cost. One thing at a time, please.
Firstly, I think you have agreed with me that it is cost that matters, not FMV when purchasing & donating within 3 yrs. If I’ve got a “hell yeah” from you, then we can move onto topic #2: What constitutes a purchase & how much a person has paid (i.e. – cost) for the item.
Yes, if a person never pays for their debt, of course it did not “cost” them anything. But, I think you are agreeing with me that IF they do end up paying for the item, then the interest would not count as part of the cost.
Even in your example above, where the person does NOT pay for the item, you STILL cannot simply count the interest “cost”. Well, YOU said that you would say that you paid $1400 for the item, but there’s not a court in the world that would agree with you, so let’s stick to the law & not what you would consider as it really is the only thing that matters. The receipt would be $0 in your example as interest paid is the cost of BORROWING, not the cost of the item & therefore cannot be counted.
Example: If you donated $1000 on your Visa, paid $100 in interest fees only & never paid off your Visa, your receipt should NOT be $100. It should be $0.
Now, if I’ve got a “hell yeah” from you on that, we can move onto your latest topic of discussion (you are hopping around here like a flea on a hot griddle).
Newest topic: A) Is the interest charged in that program excessive? B) The debt for the items bought does not get paid back
Answers A) $1400 interest paid on a $6700 purchase for 2 months would be considered excessive according to The Canadian Criminal Code, Section 347, defines the crime of usury (called “criminal interest rate”) as follows:
“Criminal rate means an effective annual rate of interest calculated in accordance with generally accepted actuarial practices and principles that exceeds 60 pr cent on the credit advanced under an agreement or arrangement.”
But, (and this is a big J-Lo but), the $1400 you pay in interest is not for 2 months. It’s not even for 1 yr. IT’S FOR 3 YRS. It is simply paid up front and not monthly or yearly, thus tricking you into thinking it is only for 1 yr if you don’t bother to learn about the program. This is why it is dangerous for people like you to talk about things they don’t know about. You are misleading people.
So, the actual amount of interest charged is $466.67/yr. divided by $6700 (using your example), which equals a very reasonable 6.9%.
Answer B) Clients HAVE to pay back their debt for the $6700 worth of medicine! If you think they don’t, then once again, you don’t know the program. Please do not mislead people into thinking that A) the debt is for 2 months (I do not know where figured that out) and B) that the debt is forgiven.
3 up to bats. 3 strikes.
Please have somebody properly explain this program to you IN DETAIL before making any more comments here. It is very hard for me to educate you on the realities as they are somewhat complex and your constant mis-education on the matter is disruptive to evrybody’s thought flow. I’m sorry – I don’t mean to offend you, but we’re talking about things that simply are not as you think they are.
After 61 days, donor refinances loan with secondary
loan provider, PanAggregate Financial Corporation,
(PFC) to lower interest rate to the minimum prescribed
CRA interest rate and extend life of loan. PFC loan is
only repayable in MUs
So after 61 days, you no longer owe money, you owe medical units.
Then soon after….
PFC is paid back for initial loan with replacement MUs
Amount owed to PFC after purchase of replacement MUs $0
So a little after 61 days, the loan is cleared.
Meaning you paid $1400 in interest to cover you for 61 days.
http://www.coip.name/5A_howitworks_orion_v1.pdf
“It is very hard for me to educate you on the realities as they are somewhat complex and your constant mis-education on the matter is disruptive to evrybody’s thought flow. I’m sorry – I don’t mean to offend you, but we’re talking about things that simply are not as you think they are.”
As for misleading people: I think COIP is the one misleading people. Most of the people I’ve spoken to about this program are under the impression they will actually MAKE money off this program.
As in:
A) Put in $1544, get $3342 back, Net profit $1798
Now your saying :
B) Put in $1544, get $3342 back, repay loan @$6700. Net loss $4902
So which one is it? At the end of the day is this a $1798 profit or a $4902 loss.
Please don’t go off on a big tangent about how my brain is too small and how I don’t understand the intricacies of the program.
Just cut to the chase:
Do I have to pay the loan back?
Do I make or lose money.
Just pick A or B
As to your statement that I don’t understand the $1400 is INTEREST.
Haven’t you ever heard of total cost of ownership?
What’s the difference to my wallet between:
$19k for a car and $1k in admin fees
or
$1k for the car and $19k in admin fees
You can divy up and label each part any way you like.
At the end of the day, its still $20k out of my wallet.
What your calling “interest” isn’t really interest anyway.
COIP’s expenses and Salaries must come out of that.
The venues they present in don’t let them in for free.
Skeptical
Try borrowing & donating $1000 to a charity, pay $19 000 in interest on the loan and see if you can claim a $20000 receipt. WILL NOT HAPPEN & the law supports it. Your 2 examples are NOT the same.
Sorry if my comments offended you. You are obviously a very smart guy. I will try to be more polite.
A) You pay the loan back by borrowing with the 2nd company. The prepaid interest goes to that 2nd company, so only $78 of the interest (2 months worth) is kept by COIP. The interest rate is lower (min. govt prescribed rate), which means that it lasts longer.
B) You never “make” money on a donation & the program is NOT sold that way. You MAY, however, do better in down the road if/when you buy pills. Nobody can comment on this until the purchase is made down the road. You may pay more for the pills (in which case, will you get an extra receipt? No.) You may pay less for the pills (in which case, will your receipt be reduced? No.).
All money made by COIP & PFC combined is the $1400. After paying for Agents & the interest component on the pills, they are still left with a good amount of money.
People are signing documents that clearly outline all of this & they acknowledge that they understand it. For Pete’s sake – they even tell people what to expect from the CRA BEFORE participating! Have you ever been to a corporate seminar?!
Please read your information more carefully. You still are missing some key points!
Skeptical:
Your earlier comment: “What your calling “interest” isn’t really interest anyway. COIP’s expenses and Salaries must come out of that.
The venues they present in don’t let them in for free.”
Ummm…and I suppose you can’t say that the interest you pay to your bank is interest either because they use it to pay for their business operations?!
It’s interest to YOU. To THEM it is revenue, which they can use for whatever they wish.
I’m sorry, but I’ve never heard anything so foolish.
I agree on the bank example and I’m glad that you finally understand what I’m getting at. I don’t care what you want to call my money after you’ve received it. If it comes out of my wallet I’m going to call that my cost. If you want to put some in the revenue bin and some in the interest bin, that’s fine. It makes no difference to my wallet.
However, two posts and 10 paragraphs later and its still not really clear how much this program is going to cost me.
The second loan is discussed, but you’ve avoided saying who pays it and what it’s paid with.
So I ask again:
$1798 up or $4902 down?
Hi everyone, new to this whole thing, I have some questions that I don’t think were answered on this blog:
1. Has anyone received an independant legal opinion on Mission Life or the tax shelter (defferal) program (or Fight Aids Save Taxes) (There seem to be alot of names involved). I would love to have a copy.
I did ask the rep. we met with for a copy of their legal opinion and was told it was not public info. that if they released this to just anyone, CRA would be able to find a loop hole in the program and discredit it and then we would all possibly have negative tax consequences.
2. The deal of the loan as I understand it, is you prepay 4 years of interest up front (I assume this is because when you receive the refund you will likely py off the loan and the finance company needs to make money (understandibly). After reading the financing agreement and all papers that come with it (I would be more than happy to email to someone that maybe able to understand it better than me) I see the loan is actually for a term of 8 years. So can I pay the loan off early and avoid paying any additional interest for the remainder of the loan period (of course I have already paid the 4 yrs prepaid). I was not able to find any info to this question in the financing agreement or maybe I just couldn’t find or understand it.
3. So am I right to assume that you are not required to pay interest and penalties from the date of the donation tax year (the year you purchase and claim on tax return assuming they are the same tax year) up to the court decision if CRA is to win?
4. Would CRA not then attach to your assets? Place a writ or caveat on your home? From my personal experience it has become clear that the banks will not lend money to repay CRA debt, so this in a concern of mine.
I am being cautious but like anyone else I would like to have a better understanding before I get into something like this, risky yes but possibly worth the risk.
5. What would be the actual cost of borrowing for the donation if you went over the entire 8 years of the loan. Say I paid $20,000 in taxes? Does the cost/benefit of borrowing for the donation still work out to my favour at least until and if the courts find for CRA.
I also have a copy of the donation schedule that I can email to someone if this would help with the above. I just don’t get it.
Thank you in advance to any of you that take the time to answer any or hopefully all of my questions as obviously I am clueless. Just trying t understand this.
Is anyone willing to email and disclose if they are a tax professional or tax lawyer in Canada? I completely understand if you chose not to answer this and I respect your privacy.
My email address if anyone would like to send me emails directly is: dianegp1-at-telus (dot) net
Thanks again for reading my novel.
I am not an accountant or a lawyer. I am not with the CRA or COIP. I’m just a guy that hates to see people taken advantage of. This thread is two years old and I jumped in late. The last couple posts from Steve seem to be indicating that the loan you get from COIP is real and it must be paid back in $.
(Still waiting for him to confirm that!)
If this is the case, then I can address #5.
1) If you want to borrow money to give to a charity, then you don’t need COIP. Just pick your charity and write them a cheque. That will save you $1400 up front, and it will also save any legal hassle from the CRA. If you actually gave $6700 to charity, then you can claim it on your taxes. When CRA comes calling, send in the paperwork. End of story.
2) If you borrowed the $6700 dollars from your bank, you would be entitled to the same refund as going through COIP: $3342 If you applied that to your loan, you would have $3358 remaining. Since your bank can probably offer a better interest rate than COIP. It would be cheaper to work through your bank. (3.25% vs 6.9%)
You may chose to invest the refund instead of paying the loan back. However, you would have to invest $3342 wisely to turn it into $6700 in only a few years. Given today’s economic climate, this may be difficult. If you found an investment that could double your money in only 4 years, then I think it would make more sense to invest the entire $6700 (and anything else you an get your hands on!). You can always give something to charity when you cash out.
SO… if the loan is real and has to be paid back with dollars…
This COIP thing makes no sense at all.
Your just paying $1400 for something you can do on your own.
Thank you Skeptical, I appreciate your comments.
Diane:
I was going to let Steve respond before I posted again, but I just wanted to point out the following.
Steve said in his last few posts that you have to pay the loan back. It is correct that you have to pay back the first loan. However, you do this by getting a second loan. So his statement is correct, but misleading.
How the second loan gets payed off is unclear at this moment. If it gets payed off by earning enough interest to pay itself off, then you are left with your wallet being $1798 richer. Sounds good doesn’t it?
The problem is that CRA doesn’t think you gave any money to charity. The $6700 never left your wallet. So you get to fight them in court over it.
If your a millionaire with your own law firm like Brian Mulrooney, its probably worth fighting for a 50% judgment on $300k. If your Joe Average like me, its not worth going to court over a couple grand. Your lawyer will eat that up in a week.
So there you have it:
Option A: You have to pay the loan back:
Your paying some $1400 to facilitate a donation to a charity.
Option B: You don’t pay the loan back:
You get to fight the CRA in court over your donation.
I’m thinking its lose or lose.
Especially when they won’t show the “secret” legal opinion.
Thank you again Skeptical.
Hi Skeptical,
In answer to your question – It comes down to how much you can buy pills for to pay back your loan. If you can buy cheap, then $1798 up. If you buy middle, then maybe $1000 up. If you buy expensive, then $4902 down, but with the advantage of having the tax credit in your pocket for a few years.
Now you’re finally seeing my point & I’m seeing yours – congrats on finally getting down this road!
Not a very good “tax shelter” is it? But that’s what I’ve been telling people for eons here on this forum – it’s not one of those “slash & burn, get an inflated receipt & see you later” programs!
By the time you pay back your debt, it’s after the 4 yr. statute bar period when the CRA can say anything about it anyway. Also, if you do better on the price of the pills, it’s NOT a capital gains issue as there is NO investment element (you couldn’t write off your interest, could you? Therefore no “investment” in the nature of trade).
A very clever & compliant program. Not a tax shelter, but it HAS to register as one due to the CRA guidelines.
Hi Diane & Skeptical,
Sorry for the delayed response…
Skeptical seems to be on the right track. Correction, though: The CRA neither expects or insists that any donation to charity has to be in cash. In fact, the #2 performing charity in Canada right now – HEDAC is #2 for receiving donations of GOODS rather than cash. You are absolutely, 100%, allowed to claim a deduction for your COST of the goods donated and this is fully supported by the Income Tax Act of Canada.
The loan part is tricky, for sure. But loans can be paid back in money or in kind too. Not common, but not illegal (eg. -barter). If you don’t think it’s legal or taxable, etc. just ask your accountant what provisions are in place if you gave your drycleaner a haircut & he did your drycleaning as payment – both parties would have to record the COST of each “value received” and declare as income on their tax returns. So, perfectly legal & valid.
Forget about all the interest, etc. It has no bearing on your receipt for the true COST of the gift and is money that you are “out”, the same as you would be out on the interest paid on your credit card if you bought a PRODUCT for $1000 with your Visa & donated it to charity. As the charity never receives the interest you pay to Visa, you can only claim the $1000 COST of the product.
What it boils down to is whether you can buy less expensive medicine down the road to get your “debt instrument” (i.e. – coupon) back from the supplier of goods being donated & then you will be returning the EXACT thing that you borrowed, in this case to pay back your debt.
The MLF & RLG programs work exactly the same & are a bit different than the COIP program, but the “finish” is identical. MLF & RLG are, in my opinion, even better than the COIP program, but are built on the same principles:
- 100% philanthropy due to gifts in kind being donated instead of cash, which can be “misspent” by the charity
- Zero fundraising fees charged to the charity
- No getting receipts for stuff you don’t pay for (i.e. – not like those old Trust or Leveraged Cash donation programs, which are all but finished)
- Finding clever, compliant, ways of settling your debt that may or may not work out for you down the road.
Riskier, but rock solid legally as you simply can’t get “something for nothing” and if it is truly too good to be true, then perhaps it is.
I can certainly put you in touch with many people working with either of those 2 programs to get you a proper understanding if you wish.
PS – I’ve seen the legal opinion! I’m sure I can arrange for somebody to show this to you too. Remember, though, that a legal opinion means nothing with regards to CRA challenges & even though people insist on seeing it, it’s funny what happens once they do. They come up an emotional excuse why NOT to do it. Sadly, this is why these type of programs are NOT for most people as you have to think legally, not emotionally.
Thanks Steve, it makes perfect sense. One other point I think it’s worthwhile to note is that the Mission Life and COIP programs (and I assume the RLG program, although I am not as familiar with this one) have used a portion of the money paid by donors to fund an arm’s length legal defence fund, held in trust by a third party tax law firm in Toronto. Well structured tax shelters will have several years worth of cash available to take the matter through tax court and 1 or 2 appeals – a process that usually takes several years. As well, only one test case goes through the court process – not all the donors. The one test case result will apply to all donors.
This legal defence fund can only be used to protect the donors’ interests, as the CRA can and will audit ALL tax shelter programs, by way of a questionnaire mailed to each donor. Regardless of the responses, CRA will also ALWAYS take the opinion that (regardless of whether or not the tax shelter structure was built to be in compliance with the Income Tax Act) they are disallowing the refund, and that they want donors to pay back the entire amount with interest. This is called a Notice of Reassessment, and it typically comes in 1 to 2 year after the donor has received their refund. Of course CRA is going to audit and reassess all tax shelters – they are entitled to their opinion and they must make every attempt to fulfil their mandate to collect as many tax dollars as possible. They’d be stupid NOT to, as this intimidating process is their way of dissuading taxpayers from participating in tax shelters.
However, this is the point when people panic, say they’ve ‘been scammed’ and write all kinds of warnings on internet threads like this one. Some donors then voluntarily pay back their refund, plus interest, and the CRA gets to boost its stats saying how many millions of tax shelter dollars they’ve disallowed, and how much interest they’ve collected from these ‘risky tax shelter schemes’.
The sober, legal reality is that NO AMOUNT is due if a donor chooses to exercise their right to appeal ie. take the matter to court for a judge to decide on whether the tax shelter is compliant with the Income Tax Act. To do this, a donor must file a Notice of Objection within 90 days of receiving their Notice of Reassessment. The lawyers take it from there, and they get paid from the legal defence fund. In my earlier post, there are some encouraging stats, from the taxpayer/donors perspective, on rulings that have made their way through court. The outcome is pretty simple.
Either the tax shelter is deemed by an impartial judge to be compliant or it isn’t. If it is, you’re helped a worthy cause, made great use of your money in paying down debt and participating to boosting the economy by investing in sound (preferably Canadian) opportunities and have expanded your wealth and sufficiency. If it is ruled on as NOT compliant, oh well, you’ve helped a worthy cause, had use of your money for several years (paid down debt, your home, whatever, invested in sound opportunities) and pay the refund back as per the judges ruling. One should still have expanded their wealth and sufficiency if they have been prudent with their refund money and not blown it on a trip to Mexico. I am not aware of situations where interest or penalties were ever mandated by a judge once a tax shelter has moved through the appeals process, regardless of the ruling. Again, if anyone can cite a specific example, please share it.
@Andro: My understanding is that anytime you have to pay back taxes, you have interest and penalties assessed as well. Otherwise, tax payers will conveniently make mistakes on the return if the only consequence is making good on the mistake. Others can weigh in but I believe that’s how it works and would be very surprised if it is otherwise.
@Steve: So, let me get this straight.
I buy $6,700 worth of drugs from a private company.
I’m advanced a loan to buy $6,700 worth of drugs from a private company. I pre-pay $1,400 in interest on the loan.
A few months down the road, the loan is transferred to another company and a few years later you pay back the original loan with medicines.
It is your *opinion* that this is all legitimate. To me, it sounds like an elaborate shell game and taxpayers participating in it are taking a huge risk.
We’ve been told by Steve that this scheme MIGHT not work and that maybe we should avoid it.
We’ve been told by the CRA that it WILL not work and we should definitely avoid it.
I’m going to listen to both of them.
CHT was running pretty much the same program as COIP.
http://forums.canadianbusiness.com/thread.jspa?threadID=14247&start=0&tstart=0
http://lawprofessors.typepad.com/nonprofit/2008/11/canadian-govern.html
This whole argument is completely pointless. Bernie Madoffs ponzie scheme relied on people wanting to get something for nothing. This is a tax ponzie scheme. Does anyone really think they can get something for basically nothing? You can argue the legalities all you want but in the end it will collapse and those Madoffs on the sideline taking the “investor” money. They will be long gone. If it sounds too good to be true…it probably is.
cxflyer: Yep, it is kind of pointless.
This is what, version 16? of a buy in low, donate high tax shelter?
This one will collapse just like the other ones.
People will still line up to put money into version 17.
They never learn.
I’ve been going through the threads on canadianbusiness.com.
All I can say is: Wow! Lots of people getting screwed.
I think I’ll have to change my name to Cynical!
So much to read through! Not sure I’ll have time to come back.
Its been fun folks! Thanks for putting up with me!
http://forums.canadianbusiness.com/thread.jspa?
threadID=5813&tstart=0
http://forums.canadianbusiness.com/thread.jspa?threadID=7838&tstart=15
http://forums.canadianbusiness.com/thread.jspa?threadID=14247&tstart=60
http://forums.canadianbusiness.com/thread.jspa?threadID=15601&tstart=75
Seek and yee shall find…
It seems the COIP program has had a few small problems with the CRA….
http://media.thestar.topscms.com/acrobat/13/f4/822bb29d4c79950f2a4eb27c39e3.pdf
post 186 from Cynical…the link to “thestar”, that is almost the exact information that i received from CRA for my 2007 COIP donation, that the donation was disallowed.
@Cynical: All I can say is “wow”. So much for Steve’s sky-high praise of COIP:
“highest performing charities in Canada”
“100% of the donation goes to actual charitable works”
“100% of them go to dying people in Africa #1) because the charities have forensic audits…” blah, blah, blah
Here’s what CRA says about COIP:
“the CRA has not been provided with sufficient evidence to substantiate that the promoter purchased the pharmaceutical units, that the charity ever received the pharmaceutical units or that the pharmaceutical units even exist”.
@Skeptical: It’s breathtaking to surf through those Canadian Business Forum threads. It is incredible that these donation schemes continue to flourish despite the long list of people who have been burnt by these programs.
CRA’s position on what constitutes a gift is devastantingly simple. If a gift doesn’t make you poorer than before you made it, it’s not a gift! All I can say is, use your common sense folks. If you effectively spend $1,400 and receive a net benefit of $1,700, it is not a gift. It’s as simple as that.
Thanks for chipping in AnotherCOIPer. Up until this point I had no confirmation that the COIP Program had been disallowed. Funny that Steve never really brought it up. He’s known about it for over a year.
I suggest that everyone read over the Banyan Tree threads on canadianbusiness.com. COIP may follow their lead.
1) Sorry, the pills cost more money than we thought they would.
Send more money….
2) The defense fund has run out.
Send more money….
This looks like it could be COIP’s last big year.
Next year … Mission Life!
@ Andro – perfect understanding. 10/10. If you were selling tax shelters, I would buy from you as you know your stuff. We need more people like you on this forum as these guys keep forgetting what I’m telling them & haven’t bothered to understand these programs. I’ve got one guy here who thinks it’s a Trust structure like CHT & another guy who thinks that the program is “bad” because the CRA has decided they don’t like it! Haven’t I been explaining from the beginning that the CRA’s opinion means nothing until a court decides who’s right & who’s wrong? Are you the only person who’s been reading? Sigh…here we go again…
@ Canadian Capitalist – There have been many cases where the CRA is NOT awarded penalties & interest due to many reasons. There are also many cases where the CRA makes a deal. Keep in mind that the CRA CANNOT afford to lose in court as this would mean that 34 million people in Canada could participate in the shelter & save taxes. Better to threaten & make deals to ensure people never do it again than to risk being obliviated by a loss in court – even if it is a 1% chance of loss!
http://www.financialpost.com/scripts/story.html?id=f583a9d7-5719-4734-af7a-a31955fa6456&k=53259 is an example of how the CRA was not awarded interest.
@ Skeptical – No, I never said that the program “might not work”. It works according to the law. It’s to what degree you may come out ahead financially that I was tempering. You can’t get something for nothing, remember?
@ Skeptical – No, CHT is nothing like COIP. CHT gave you FREE stuff from a Trust that you donated to charity & got a receipt for. Inflated receipts v.s. what you paid (which was $0).
Sorry – 0/10
@ Cynical – Having “problems” with the CRA is something that COIP tells it’s participants before participating. That link was simply the expected CRA proposal for reassessment that they say 100% of participants in 100% of tax shelters will go through. Yet they keep on letting companies promote. Doesn’t that tell you something? It’s not what the CRA thinks people – they have an agenda: TO COLLECT TAXES. Let’s see what the law says as it’s the only thing that matters. Gotta get with the program here, my friend – 5/10
@ Exflyer – Correct that you can’t get something for nothing. But that is why these new programs are good, because you don’t get something for nothing. Thank you for your support on this. If you are surprised by what I’m saying than take another look. Skeptical just saw the light & you just may too.
See the above comments re: NOT getting something for nothing – 7/10
@ Canadian Capitalist – Ummm, yes I’ve said from the beginning that all tax shelters will be challenged by the CRA. The disallowment is expected & I’ve been telling you that for ages. Just read the earlier threads & you’ll see proof of that. The CRA’s position things is meaningless once a Notice of Objection has been filed. Only a court decision is what matters!
@ Canadian Capitalist – By your own flawled logic – whatever the CRA says must be right, eh? They never make mistakes, I guess, huh? Riiiiiight…..
Lives in lala land: 0/10
@ Canadian Capitalist – Please read the posts before responding to them. I never said that COIP was one of the highest performing charities in Canada. COIP is not even a charity!
Not reading: 0/10
The CRA has conducted a forensic audit, which passed 100% and I’ve got a copy of the paperwork to prove it. If anybody would like to see it, please let me know & I will e-mail it to you!
Proof of this is that if the pills didn’t exist, there would be no legal challenge. Besides, haven’t you seen the video from the accounting firm that went down to Africa with the charity (not COIP) and videotaped the actual clinic with boxes & boxes of medicine with COIP on it to hundreds of people lined up? I guess that whole thing was staged, eh CC? Again – if you would like a copy of this, please let me know.
Guys – come on. That stuff is easy. That’s not what the CRA is having issues with. These companies have build a better mousetrap & the CRA is trying whatever they can to deter. It will all come out in court – again – the only thing that matters.
Do you honestly think the CRA has YOUR best interests at heart?
@ Canadian Capitalist – Your oversimplification of what you think defines a gift is simply wrong. I do not even think that the discussion of “impoverishment” is at all relevant, or in question, and I think that most people (even professionals) misconstrue the legal importance of the concept, as it is not actually a tax law concept. It derives from the civil law as the counterpoising side to the doctrine of unjust enrichment.
Laking on the legals: 3/10
@ Cynical – Please get up to speed. I’ve been saying for a looooong time that all programs will be challenged by the CRA. I have been guaranteeing people this would happen on this forum for months. COIP people tell donors that before they even sign up! Don’t you get it? That’s not the topic of discussion.
The COIP program has not been offered since Jan, 2009. It’s only RLG & Mission Life being offered in this “type” of a tax shelter program.
Poor homework done here: 1/10
Ding! Round 645…
@ Canadian Capitalist: I mentioned HEDAC as the #2 performing charity in Canada as evidenced by the CRA & Money Sense Magazine & even gave you the link. How could you say that I said “COIP was a good charity”?! The charity working with COIP was the Orion Foundation who gave it to Direct Relief for 3 yrs. If the pills “never existed”, then the charity would be shut down & I think that Direct Relief would have figured it out within 3 yrs, right? Orion is not shut down & Direct Relief (www.directrelief.org)didn’t have the wool pulled over ther eyes. That should tell you something. Don’t believe the hype!
For those of you who would like to see a thank you letter from Direct Relief (one of the top charities in the US) for all the pills they received, that the CRA says doesn’t exist, then please let me know! Maybe if I show that to you, I will do the impossible & show you that the CRA sometimes doesn’t play by the rules. Sorry to burst your bubble.
I’m sure that AID for AIDS would work with a charity that is not delivering medicine to Africa: http://www.aidforaids.org/ They just partnered with HEDAC. Guess what? Mark my words, guys, when it’s time, the CRA will say that the medicine going to HEDAC
I’m pretty sure that Robert Thiessen had lots of paperwork and glossy photo’s to show people that started asking questions. The longer you can maintain an air of confidence in the program the more people will buy in.
Every other version of these programs has turned out to be a con an your
progressing along the same path.
Phase 1 of the business plan: Sell tax receipts. (Call it “Interest”)
Phase 2: Ask them for more money for the legal defense.
Phase 3: Ask them to pay back the loans.
An interesting point on the loans. The loans are held in Medical Units and not cash. What will be the value of an MU in 7 years? If the loans are brought back into Canada, it could be a lot. The value of an MU has been going up in Canada. These people are financially liable for a loan who’s value is yet to be determined.
Shy Kurtz, identified in the Aids For Aids photos as being from HEDAC. He is a principal on the Mission Life team. So the promoter also runs the charity. Note that Money Sense is also listed as being part of the team.
http://www.fightaidssavetaxes.com/forms/Presentation_FAST_MissionLife_2009.pdf
As to the agreement…
Your on vacation in the Dominican Republic.
Call up Aid for Aids
Sign “a letter of intent”
Pose for some picture
Write off the whole trip as a business expense.
Takes what? an afternoon? Did they buy ya dinner too?
This Shy Kurtz?
Crikee! Are you sure this isn’t coach from Survivor?
I could barely contain my laughter when I read this bio.
http://www.pro-seminars.com/PresenterDetails/Bios/Shy%20Kurtz.htm
“@ Cynical – Please get up to speed. I’ve been saying for a looooong time that all programs WILL BE challenged by the CRA. I have been guaranteeing people this WOULD HAPPEN on this forum for months. COIP people tell donors that before they even sign up! Don’t you get it? That’s not the topic of discussion.”
See now you completely missed my point.
WILL BE and WOULD HAPPEN is completely different from HAS BEEN and HAS HAPPENED.
You’ve been misleading people about the current status of the COIP tax claims.
Its not:
“going to be reassessed”
Its:
HAS BEEN REASSESSED AND DISALLOWED – A YEAR AGO!
Its no longer a question of IF you go to court, its WHEN.
You haven’t given these people any tax break,
You’ve GUARANTEED them an expensive court battle.
/************************************************************/
And why is the COIP program no longer offered? You keep saying its all legal, no problems with the CRA, everythings great. In fact in Post 138 you said:
“COIP, RLG, & Mission Life are all still around & are not disappearing. ”
Now your saying it disappeared a year ago?
Some problems your not at liberty to discuss?
/***********************************************************/
“@ Skeptical – No, CHT is nothing like COIP. CHT gave you FREE stuff from a Trust that you donated to charity & got a receipt for. Inflated receipts v.s. what you paid (which was $0).”
No, I said COIP is like CHT and it is:
1) You pay interest or fees, or into an investment and receive a tax receipt worth way more than you put in.
2) Aids drugs are supposedly bought on your behalf and distributed in some foreign country. The purchase and distribution of all the property takes place on foreign soil.
3) The loan/trust property is held in a private company in a foreign country.
Sure they called it a “Trust” instead of a “loan” but its pretty much the same game now isn’t it? Please feel free to go on and on about how the terminology makes such a huge difference and that the COIP program is COMPLETELY different because we had different forms for people to fill out.
/*******************************************************************/
@Steve “No, I never said that the program “might not work”.
I’ll give you that one. You never specifally said “the program might not work”
However, you did say:
POST 128: “I wish you the best in your financial/tax lives and I beg you to NOT participate in any government registered tax shelters EVER. You will be
doing yourself a favour.”
POST 140: THEN, if you don’t pay (assuming you don’t take a deal from the CRA before hand and actually lose in court after 1 or 2 appeals) you can get in trouble.
POST 176: “Not a very good “tax shelter” is it?”
I took all that and paraphrased it as “might not work.”
Sorry!
If anyone is interested:
http://www.globalphilanthropy.ca/images/uploads/Healing_and_Assistance_not_Dependence_Canada.pdf
They were taking in COIP donations and disbursing them to Orion.
I can see how you could get pretty big doing stuff like this.
You could be a million $ charity with close to 100% disbursement!
@Steve: I understand COIP is not a charity but a tax shelter just fine. I’m simply pointing out your sky-high praise of the charities and CRA’s position that there is no sufficient evidence that the pharmaceuticals even exist. Sure, CRA might make mistakes but there are far more believable than folks on this board claiming to be privy to forensic audits.
I couldn’t care less what your opinions on this subject are. It’s clear which side your bread is buttered. What I’m hoping is that others who may be considering participation in these tax shelters have a clear idea what they are getting into. Sure, it will feel great to stiff the Government but rest assured that the feeling will pass. When it’s all said and done, you might come to rue the day you heard about these shelters.
For those who are interested, check out what the worst-case scenario could be according to this website:
http://www.protectyourrefund.com/warranty.html
To add insult to injury, participants in past shelters are being sold warranties to “protect the refund”!
The Mission Life Loan Agreement is on line:
http://www.canadiantaxpayersassociation.ca/files/SEPTEMBER%20Loan%20Application%203.0_FINAL.pdf
It doesn’t really matter is Steve shows you the secret legal opinion:
Your Acknowledgement of Risk:
3) If the promoter has received tax or legal opinions from its own legal counsel,
I understand that that these counsel do not act for me, and that I cannot rely
on their opinions or on the promoter in deciding whether to participate in
the MLF Program and whether it is suitable for me.
The Newsletter contains a list of charities that had their charitable registration
revoked in 2009 due to tax-shelter related non-compliance.
http://www.carters.ca/pub/bulletin/charity/2010/chylb186.htm
Steve has some strong points.
Cynical–look at the list. COIP is not mentioned. They must be doing something right???
So I’m looking through the fight aids save taxes presentation:
http://www.fightaidssavetaxes.com/forms
/Presentation_FAST_MissionLife_2009.pdf
I’m looking at the photo of the Logipharm plant and I’m starting to get impressed with their nice clean, organized facility when…
Hey! That’s not a drug manufacturing plant! That’s an SMT electronics plant.
I see solder paste screening machines, pick and place machines and IR reflow ovens.
@Anna: Cynical–look at the list. COIP is not mentioned. They must be doing something right???
You mean my list on Carters.ca? You are correct. COIP is not listed. They are not a charity. However, their involvement in Healing and Assistance Not Dependence Canada is what lead to that revocation.
See post 196
COIP is getting charities shut down.
They must be doing something wrong???
@Anna: COIP is not a charity but a tax shelter. Charities that COIP works with have a habit of getting into trouble with the CRA. Apparently, the All Saints Greek Orthodox Church referred to in the CRA document is in trouble as well.
http://www.thestar.com/News/article/208325
@Cynical: That’s so funny that the picture in the FAST presentation is from an electronics plant. I’ll bet that Steve has possession of a super secret forensic audit of the presentation somewhere.
If the charities have undergone a “forensic” audit and passed, they should receive a letter of compliance from the CRA.
http://www.cra-arc.gc.ca/E/pub/tg/t4118/t4118-08-e.html#P98_5554
I verified with my documents and the years I donated to COIP, none of the charities are listed on the Carters.ca not the CRA site.
The CRA must also be responsible. Before I donated I called them and they told me that COIP was the strongest program. He could not say anything negative.
If i called them to verify, why is it wrong now?.
1) From Post 23……
Anna // Dec 27, 2008 at 10:39 am
Steve,
I agree. I tried to get as much info as possible and every time I call the CRA they never have a straight answer for me other then “do not get involved”. That is unacceptable answer. I will donate this year and hope for the best.
I truly can not find anything wrong with this program.
Thanks Steve, greatly appreciate it.
/——————————————————-/
2) The CRA’s official position on Tax Shelters since 2006:
http://www.cra-arc.gc.ca/nwsrm/lrts/2006/061031-eng.html
http://www.cra-arc.gc.ca/nwsrm/lrts/2007/070813-eng.html
http://www.cra-arc.gc.ca/nwsrm/lrts/2008/l081204-eng.html
http://www.cra-arc.gc.ca/nwsrm/lrts/2009/l090402-eng.html
http://www.cra-arc.gc.ca/nwsrm/lrts/2010/l100120-eng.html
I find it really hard to believe that you could get anyone at the CRA to comment on anything due to privacy laws. All they can do is confirm the Tax Shelter #.
YES. they always confirmed the tax Shelter number and they always told me that it is a risk BUT they also confirmed that they was no warning against the Tax shelter numbers i provided.
If it was so illegal..why doesn’t the CRA shut it down!! That must tell you something.
Up to date, no program had to reimburse 100% of their donation. People give in because they are scared.
Only time will tell…
Anna:
1) The CRA cannot comment positively, or negatively on an organization until they have won (or lost) in court. They could be sued if they were revealing information. Refusal to provide information should not be interpreted as approval.
2) What COIP/Mission Life is doing is LEGAL! They are talking you into giving money to a charity and delivering a receipt to you.
What your doing is LEGAL. You are claiming a deduction on your income tax that may, or may not, be accepted.
Its only ILLEGAL if you lose in court and you still refuse to pay.
So when you ask Steve: “Is this gonna work?”
and he answers “It’s all LEGAL!”
Your interpreting that as – Its gonna work! I’m gonna make some money!
He didn’t really say that now did he? LEGAL != WILL BE ACCEPTED.
3)These cases take years to settle. These programs depend on that. You buy in the 1st year. Seems to be working. Double it every year after that…. Get your friends into it, then …. collapse.
4)These programs are money losers even if you have to reimburse only 50%.
Whoa!
I can’t leave you guys alone for a minute, can I…
Cynical – The CRA warns against 3 types of structures (note, I said “warns”, not “says is illegal”):
1) Leveraged Cash programs
2) Trust structures
3) Buy Low/Sell high programs
COIP, RLG, & Mission Life are none of these.
“Sure they called it a “Trust” instead of a “loan” but its pretty much the same game now isn’t it?
Your statement above is laughable. Have you ever set up a scholarship TRUST fund for your child? Have you ever set up a family TRUST? Replace the word “trust” for the word “loan” and see how similar they are.
Ask your bank if you can replace all your loans with trusts, then and see if they think it’s the same thing. Sorry 1/10 on your logic for this one, my friend.
@ Canadian Capitalist: I respect what you are trying to convey, but the medicine exists. Direct Relief has said they received it. The CRA has accepted the forensic audits that COIP supplied. Why wouldn’t the medicine exist? That’s the easy part. The program works & all the companies make LOTS of money WITH the medicine existing! Why would they risk something obvious like that. That’s the thing that gets programs shut down for fraud. NONE of these programs has been shut down. Think about it.
@ Cynical: If COIP was getting charities “shut down”, then the Greek Orthodox Church would be shut down & the Orion Foundation would be shut down. They aren’t. If you would like to see my “super secret forensic audit”, please give me your e-mail address & I will send it to you. But please come back on the post & let people know you have seen it & that you recant your accusation, okay? I hope you can walk the walk as much as you can talk the talk and I promise not to say “I told you so”. Let’s do what’s right here, okay?
@ Cynical: Do you ever think about what you say before you say it? If COIP tells people that their program will be reassessed before participating and people still buy because the reassessment does not determine whether your tax deductions are valid (only a court can do that after a Notice of Objection is filed) then why, when the reassessment does come out would that cause any change in the thinking? Emotionally, however, new people buying would rather be participating in programs that have not YET been reassessed, so they would look elsewhere if there are similar GOOD programs available. COIP couldn’t compete once they were reassessed, but the CRA did not stop them from marketing (they can’t) and people could continue to buy if they chose to.
Fact – COIP stopped marketing in early 2009, so I’m not sure what you’re barking about. 1/10 on your research & illogical thinking.
@ Anna – Good for you! It’s hard to come onto a forum like this where people promote fluff & don’t stick to the law. You are sticking to the law & proving people wrong here. We all know that the CRA doesn’t warn against any of the 3 structures we’ve been talking about, yet they say they will reassess all tax shelters. Donors will then file a Notice of Objection, which removes the CRA’s opinion on the tax shelter from doing any harm. A court will now decide what happens & the CRA will start to make deals with the donors because they can’t afford to lose in court. All these new programs tell people exactly what will happen before they participate & the people on this forum are complaining that the tax shelter companies are the bad guys! Unbelieveable…
@ Cynical – Just when I thought you were absolutely bonkers, you surprised me. What you said in your last comment is 99% correct. Thank you for allowing me to hold out hope for you!
Here’s where you’re wrong. Not 1 program since Klotz & Nash has lost in court and the CRA settles many cases out of court. If you get a deal @ 50% of your money, you WIN. You’re forgetting about the earnings potential of that $$ over the course of many, many yrs. Rule of 72 pal, @ 7% interest, your money doubles every 10 yrs. If you go the distance, however, and these newer programs win in court, then you keep everything. The best lawyers in the country can’t find problems with these programs, so you think the people on this forum & the CRA can find issues? Come on.
Guys – You know what would make everything much simpler? If the CRA simply told everybody whether they felt these programs follow the law or not. They have an opportunity to do this right now. They issue Tax Shelter ID #’s and then refuse to tell the promotors whether they feel the program works. Do you know why they don’t do this? Because they are afraid of the 1 program in 10 that might actually work! Think about it. If ANYBODY can answer this question for me, then please tell me. This is my whole beef about this forum – you are placing the blame on the companies that are doing what they feel works & are selling to donors that feel these programs work. The promotors get legal opinions from law firms saying they work, so why won’t the CRA take a stance BEFORE participating to save everybody all the trouble?! Think about it.
Just re-read my e-mail. I’m fending off so much BS from so many people, I mentioned the forensic audit offer to Cynical, when I meant to offer it to Canadian Capitalist.
@Steve: I have nothing to recant (my email is cc at canadiancapitalist.com BTW).
You say CRA has “accepted the forensic audits that COIP supplied”.
Really? Here’s what CRA says in its notice of reassessment to the taxpayer.
“the CRA has not been provided with sufficient evidence to substantiate that the promoter purchased the pharmaceutical units, that the charity ever received the pharmaceutical units or that the pharmaceutical units even exist”
Doesn’t sound like acceptance to me. Feel free to ask CRA to recant.
I am fully capable of calculating this using compound interest. Since we don’t know those values, lets keep it simple and do the analysis as though the entire transaction takes only one day:
We will start at noon and end 7 years later at 7 p.m.
12:00 noon to 12: 15 (3 months)
The donor gives $1400 to COIP, gets a receipt for $6700 and gets a refund for $3342.
Score
Donor: $1798
COIP: $1400
CRA: -$3342
2:00 P.M
CRA phones and says forget it, you fight for a year and on 50% of the $3342 you received. You pay them back $1671.
Score
Donor: $127
COIP: $1400
CRA: -$1671
7:00 P.M.
COIP Phones and wants to close out the second loan. You owe them $6700 worth of pills. The pills can be bought at a better price than $6700, but nobody said they would be free. Lets say COIP lets you off easy and only asks for 20% of the Canadian FMV.
Score
Donor: $-1213
COIP: $2740
CRA: -$1671
Are you starting to see who’s winning this game?
Steve: I’m not trading my email address with anyone on this forum. These programs are worth millions and we naysayers are a thorn in your side.
I have searched the CRA website and there is no such thing as a “Forensic” audit. Just a plain old audit. If Orion has passed one, then they should have a letter of compliance. If COIP or Mission Life had that, don’t you think they would post it on their website? Wouldn’t that end this discussion? Wouldn’t that be a great marketing tool? While Steve offers bravado about “Forensic” audits, I hunt down documents that show the true relationship.
Wake up folks. After Steve and friends have split up your $1400, there’s nothing left! There are no loans. There are no pills. There is no charity work being done. Just Steve trying to line his pockets with your money and leave you fighting with the CRA.
@ Cynical – You continue to show the world that you still don’t know how these programs work. I cannot keep wasting my time with you if you don’t listen. When I move to Canada, remind me to show you how everything works. Let’s see if I can clarify:
COIP: Buy $6700 worth of medicine & Pre pay 3 yrs interest (X%/yr) totalling $1400. Debt can be paid by paying $6700 in cash or $6700 worth of pills with proof of purchase.
Pills are donated to a charity. Law says that you cannot claim the $1400 in interest paid to a company for the pills purchased, but only for the purchase price of the pills. The law says you can buy now &
pay later up to 10 yrs and if a min. Amount of interest is paid.
Check & check. You receive a receipt for $6700, which is the price you paid for the pills, despite the fact that you haven’t paid off the debt yet (credit card donation example).
You receive a tax credit of approx. $3100 (46.4%) (I’m working without a calculator right now). You’re up (in cash only, not on paper – just like a credit card donation or if you bought something on credit & will pay it off later)
You settle your debt with COIP early (61 days later) before the pre paid interest runs out by buying MORE pills from a different company, PFC, on credit again & transfer the balance of PPI from COIP to them.
The new debt to PFC is paid back in pills only in 3 yrs time, leaving extra prepaid interest left over due to a lower interest rate charged.
Donors expect to be able to buy pills at a much lower price on the world market using the leftover pre paid interest. If the don’t think they can, then they don’t participate.
IF donor can buy cheap pills with THEIR own left over pre paid interest, then the only other money at stake is their standard tax credit of $3100 – the $1400 PPI = $1600 net cash flow positive position.
If CRA challenges the $6700 receipt and makes a deal with the taxpayer for 10 cents, 20 cents, 30 cents on the dollar or if the program wins in court and the donor has used the $$ wisely or if the donor blows the money & the program wins in court (it should, based on law), then the donor comes out way ahead. if the donor uses it to pay off 18% Visa bill debt, they win EVEN I’d they lose in court. Anything else & the donor loses. If you think the program works differently, you’re wrong. If you plan to do something differently & ignore the known risks – don’t participate.
Cynical, I participate in these programs – I’m a customer! If I know this ahead of time, then who are you to complain for me? I know the risks & I am prepared to take them.
I put my money where my mouth is too as my wife & family all participate. Who are you to tell us what you THINK we’re missing?! Get over yourself.
It’s obvious that:
A) You know nothing about how these programs work
B) You are telling people on this forum that I work for COIP to try & stir up problems for me
Proof of the fact that you have no interest in reading or learning is obvious. I mentioned in my last post that my intention to get the forensic documents via e-mail was for Canadian Capitalist, not you, yet you still rambled on.
In one breath you say how these programs are a tax sham & the next breath you prove with your own words that they are legit from a tax standpoint, but that the math doesn’t work. Which one is it?
@ Canadian Capitalist – I’ll e-mail you those audits (done at the CRA’s request, by an auditor of their choice) shortly.
Steve,
I am interested in seeing the audits. Can you please email me.
Thanks
ANNA—-great to see you still plugging away with COIP. enjoy your tax credits and also give MISSION LIFE FINANCIAL a turn down the road. they are both the safest tax shelter out there. the cra i feel will not go to court because the cannot afford to loose. THE LAW MUST PREVAIL AND THE GOVERNMENT MAKES THE LAW NOT THE CRA.
THANKS ALL: enjoying all the comments.
1) If Orion has passed an audit, then they should have a letter of compliance from the CRA. Show us the audit.
2) If the second loan is paid out by supposedly buying pills with the left over interest, then we are back to square one. The donor never really gave any money to charity. Its just paper shuffling to sell tax receipts.
Steve: When I move to Canada, remind me to show you how everything works.
Steve: Cynical, I participate in these programs – I’m a customer!
Do I need to point out the obvious inconsistency with these statements?
Steve: You are telling people on this forum that I work for COIP to try & stir up problems for me.
Uhmm.. you’ve already admitted that you are connected with COIP. How else would you have access to confidential tax audit information about canadian charities when you don’t even live in this country?
Steve: @Cynical – I cannot keep wasting my time with you if you don’t listen.
O.K…. So why do you keep coming back? Do you think you are the world’s greatest salesman and you are going win me over? Let me make it clear: We will NEVER sit down and discuss this over coffee. I am NOT a potential
customer. STOP wasting your time with me.
The only reason that anyone would buy into this is emotion. That emotion is GREED.
Steve: Just re-read my e-mail. I’m fending off so much BS from so many people.
Why would so many people be sending you emails about this? I thought you were just another anonymous donor? I had no idea that anyone was even following our little debate!
Anna: When an audit is performed, the CRA will issue a letter stating the results.
That’s what you want from Steve.
Here is an explanation of the audit process:
http://www.cra-arc.gc.ca/E/pub/tg/t4118/t4118-08e.pdf
Steve,
I bet you go real quite in a year or two. You know after CCRA asks for its money back. You have to be involved in selling this thing as you certainly “waste” a lot of your time trying to convice everyone of its legitimacy.
@Brian: Yes, CRA does not make the law but it’s interpretation is quite different about these tax shelter schemes:
1) CRA disputes that the donations qualify as a gift because (a) it doesn’t believe participants held legal title to the pharmaceutical units (b) the transfer of property was not voluntary (c) material benefits were derived from the transactions.
2) CRA disputes the FMV of the pharmaceutical units and says the values are “inflated”.
http://media.thestar.topscms.com/acrobat/13/f4/822bb29d4c79950f2a4eb27c39e3.pdf
It looks like the battle is headed for the courts but I want to address claims that CRA will settle for 10, 20 or 30 cents on the dollar. Here’s what the guys who are selling “warranties” against an adverse tax decision for those who participated in past shelters are saying:
“The last three cases that went to court, which dealt with Tax Donation Deals, the tax payer lost all of them. The Fair Market Value was reduced to the tax payers purchase price. As well, interest was added to the amount owing, but not penalties. ”
http://www.protectyourrefund.com/updates.html
Doesn’t sound like the CRA settled for pennies on the dollar to me.
@ Cynical
Sigh…Cynical, you’re not reading AGAIN. You just said that “…the donor never gave any money to charity…” I’ve been telling you that in these programs you DO NOT GIVE MONEY to charity, you give goods for the large donation. Can’t you absorb this? No money. Zip, nada, nothing. No cash donations to charity – goods. Are you even reading this forum?
A charity proves it’s good standing by keeping it’s charitable status each year. The Orion Foundation is a charity in good standing with the CRA currently & always. There is your proof. If you don’t think that charities can lose their status, then think again – the proof is all around you. Just read the CRA bulletins on their web site.
Cynical – We’re discussing programs that have been around for 4 years. I don’t live in Canada presently, but I lived there a short time ago. Ever hear of airplane travel? That does not change the fact that my wife, family & friends have all participated in thes programs & currently do now. I’m a participant & you are trying to tell me that I’m being “tricked”? I know the deal & I don’t need you to save me. Quit trying to give me advice, okay? I do not respect your acumen when it comes to tax law, so you can stop trying to convert me.
I have never been trying to “win you over”, I’ve only been correcting your innaccurate, idiotic responses & lack of tax knowledge. I could care less if you participate in a tax shelter – in fact, please don’t, ever! You’ll do the world good by staying far away from this industry. Please.
“Connected with” v.s. “Working for” – Ummm…there are about 5 000 people who are “connected with” COIP. The “top secret” audit information isn’t that secret. There are many people out there who have it. Let me guess – you weren’t on the preferred client list?
The BS I’m fending off is from you, CC, & a couple others on this forum. Who else did you think I was referring to?
@ Exflyer – Please read the last month of threads. The CRA has & will always ask for the money back. That’s not what we are discussing here lately. Guess what, I’m still here writing, so you’re already wrong regardless. Please get with the topic du jour and don’t comment unless you have something intelligent to say. P.S. – It’s “quiet”, not “quite” and by your logic, you then must be working for the CRA if you are coming onto this forum to tell people not to do these programs.
@ Canadian Capitalist: The “warranties” were found to be advantages related to the gifts. These are being promoted by Trust companies who give people stuff for free to donate to charity & claim a receipt. The CRA warns against these programs, but not the programs we are currently discussing. The only tax shelter case that has lost in court is the Klotz & Nash case where the donor was REDUCED to the amount they paid for the gift – the FMV. These new programs are built ON that verdict – that the receipts reflect the cost of the gift. That statement actually supports the validity of these programs, but I wouldn’t expect you to understand why. By your logic, all stocks must be bad if one dropped, so don’t ever buy stocks again. What makes you think that all tax shelters/deferrals/strategies are created equal?
I sent you off copies of the VERY AVAILABLE audits, letter from Direct Relief PROVING THE MEDICINE EXISTS & WAS RECEIVED, etc. I e-mailed you in confidence, so please respect that fact & do not share my e-mail address with everybody. There are a lot of crazies out there. It would be nice if you also acknowledged receipt on this forum so that these people will know that I was telling the truth.
If everybody on this forum would rather I do not respond any further, then I’m outta here. I thought I was providing good input based on law & personal experience amidst a sea of illogic & inuendo, but if nobody is getting anything positive from it, then we’re all just wasting each other’s time. Your call.
@ Cynical – I’ll be back in Canada later this year – coffee?
@Steve: Yes, I received copies of the audit and letter from Direct Relief. And I can assure you that I never publish or share private communications without explicit prior permission.
My point is that the shelter programs in existence in the past were claimed to be completely valid in the past. They claimed at that time that CRA does not have warnings against them. All perfectly true but CRA went after the donors and when the donors lost, the promoters are back with a new and improved tax shelter. This is a cat and mouse game and history shows that the cat (CRA) usually gets the mouse (donors). The point of the original post stands. The participants in these shelters are taking a significant *financial* risk.
Steve,
Actually your comments have helped me tremendously. Please do not leave this forum especially for hard headed people.
Can you please forward me at (4friends1972 *no spam* @libero.it) the email you sent Canadian Capitalist in regards to the audit?
I have invested in COIP 2007 and 2008 and am now going to take a look at Mission Life. I’ve been in contact with Bruce. I also sent him the llink to this forum…
Wow! That’s sure is a rant. Not really worth responding to that point by point.
Steve said: “If everybody on this forum would rather I do not respond any further, then I’m outta here.”
I think everyone can guess what my vote is 8>)!
Steve, could you also email me the audit also? dianegp1*no spam*@telus.net
I am in the final stages of starting the process myself!!!
http://www.canada.com/edmontonjournal/news/story.html?id=ab2ed4f0-de19-47bf-8846-8509f010b419
http://www.volunteerlawyers.org/news/article.204045-Charity_taxshelters_the_CRA_and_you
http://www.canadiancharitylaw.ca/index.php/blog/comments/cra_succesfully_attacks_abusive_charity_gifting_tax_shelters/
http://www.canadiancharitylaw.ca/index.php/blog/comments/is_this_a_legitimate_canadian_charity_a_comment_by_mark_blumberg/
http://www.canadiancharitylaw.ca/index.php/blog/comments/court_certifies_class_action_lawsuit_over_banyan_tree_leveraged_charitable_/
http://www.canadiancharitylaw.ca/index.php/blog/comments/tax_shelter_gifting_arrangement_revcocations/
http://www.canadiancharitylaw.ca/index.php/blog/comments/are_charitable_donations_in_canada_down_in_2008_depends_how_you_define_dona/
http://www.canadiancharitylaw.ca/index.php/blog/comments/russel_v._queen/
Mark Blumberg is the Man! If you could get HIM to say COIP is a sure thing, then I would buy in.
http://www.blumbergs.ca/aboutus.php
“If you are buying drugs in India, you cannot say I bought them for $1 per pill in India, but they are worth $20 per pill when they are donated in Ontario and therefore the fair market value of the drugs you paid for last week is $20. How stupid do you think tax court judges are?”
http://www.canadiancharitylaw.ca/index.php/blog/comments/canadian_charity_donation_tax_shelters_make_no_financial_sense_or_any_other/
@ Cynical – you’re right, you cannot buy a pill for $1 and say it’s worth $20 and get a receipt for $20. That is how all the older programs work. The new programs that I am talking about have people buy pills for $20 and claim $20. Thank you for substantiating what I have been saying all along.
Thank you again for proving how little you know about the donation tax shelter industry.
The sad part is that you probably don’t even know what I’m talking about & won’t be able to figure out.
So far, I have 2 people saying they want me to stay posting on the forum & one person asking me not to. ExFlyer is still spell-checking the word “quiet” & CC has abstained from voting. (CC – thanks for the confidentially, btw. It’s nice to know that despite differences of opinion, that you are a stand up person.) Feel free, though, to send the Deloitte & Touche brochure to Cynical. I wonder what he will say when he sees the graph of a person’s COST v.s. the donation amount claimed! He’ll have a heart attack! Here is a Fortune 500 company promoting exactly what Cynical thinks is “naughty”.
If I do leave this forum, then what will you people be talking about? I think it would go something like this:
————————————————–
Person 1: Yeah, tax shelters suck.
Cynical: Yeah.
Person 2: Stay away from tax shelters.
Cynical: Yeah, they are bad. You buy stuff and try & claim a higher price and all the money donated to charity never gets to the charity.
Person 2: But that doesn’t sound anything like how these programs work. You just mentioned the donation of property, but then said that no cash gets donated. Do you even understand how these programs work?
Cynical: I don’t need to understand anything. It’s all just smoke & mirrors – trust me. I’m your friend, these other guys aren’t.
Person 3: I heard they are REALLY crappy. I read about it in the newspaper.
Cynical: Yeah, they are really, really crappy. Newspapers always present a fair perspective of absolutely everything. Newspapers – cool. Tax shelters – uncool.
————————————————
Cynical – take it in stride, my friend. You may not have to put up with me much longer.
Most of you all sound like nice, reasonable people, but beating my head against some brick walls here is just wasting everybody’s time. Let’s see what some of the other people say before I make a decision…
@ Anna – I’ll contact you via your e-mail address privately off the forum regarding all the other stuff, okay?
I post articles from respected lawyers who are experts in Canadian charity law.
You post rhetoric, insults, and bravado. There’s no real info in your last post.
Not much of a debate.
Steve,
Sounds great. Can’t wait to get your email:)
well one thing for sure Steve, you and your followers are brutes for punishment.
Steve,
I’m still waiting for the info. Please email me.
I just attended a Mission Life presentation and have been doing a lot of research. I very much respect the debate on line and hope to God Steve stays engaged in the debate.
These posts can be time consuming and emotionally draining especially when individuals fail to use logic and instead buy into how they feel.
Steve, I have worked in private health care in Canada for years. For years a good percentage of the debate centred around what was “legal vs illegal” and here we are years later with choice backed up by the Supreme Court.
Still the emotional rhetoric around this issue continues to the point its almost not worth discussing.
I think the same thing has happened on this thread.
The debate is good and the factual information is better.
Based on my own research along with reading all threads here it has cemented my decision to participate in MissionLife tax shelter.
Steve, thank you for your factual information. Thank you to the others who have also tried to be factual and have at least provided for some interesting debate.
I truly hope Steve that you stay engaged in this forum.
I would be interested in any of the information you have sent to others like Anna. You can e-mail me at create_it_decor@ *no spam* yahoo.ca
I haven’t heard from him yet. If you do, please forward me the info at 4friends1972@libero.it.
thanks
Any news from Steve..i haven’t received anything.
Canadian Capitalist can you please forward me the info Steve sent you at 4friends1972-at-libero.it.
@Anna: Not sure why Steve disappeared from here but I cannot forward the info Steve sent without his permission. Sorry.
Canadian Capitalistno worries I understand but it’s frustrating.
Thanks
Want to share with you, as a 2007 & 2008 COIP donor only, CRA recently sent me a letter that my 2007 donation is disallowed, sent me a re-assessment that I owe 14K in taxes for 2007. I then filed my 2009 taxes, where I was supposed to get a refund, CRA kept it, and applied it to the 2007 amount that they say I owe.
My friend, in almost the same position, except that he made a 2009 COIP donation, got back his 2009 refund of over 10K!!! Go figure, even though he was re-assesed for 2007 and told that he has money owing to CRA for 2007, he still received a refund!
Where is the consistency in the processes and rules of CRA? It sounds like there are none and whomever is responsible to review your tax information, simply makes up the rules along the way.
Don’t worry.
There will be consistency and fairness.
They will get your friend too.
All just a matter of time.
Hi Another COIPer,
The CRA’s behaviour is normal. They always take the position that they will disallow ALL tax shelter refunds, regardless of whether they are compliant or not with the Income Tax Act, and will come up with an argument to support their position. COIP has always maintained that transparency when they present their program. They let people know upfront that CRA will both audit the participant’s involvement in the tax shelter, and they will always take the position of reassessing to a $0 and ask for the money back plus interest retroactive to the day you received your refund. They also post warnings on their website attesting to the fact that they have disallowed x million dollars of refunds, plus interest. There’s really no mystery here.
However, just because the CRA takes a blanket position of denying all tax shelter claims, doesn’t mean that the claims are not compliant with the Income Tax Act, which is the law. It is also not the CRA’s job to interpret the law – and all taxpayers have the right to dispute the CRA’s opinion. And the stats are very strongly in support of taxpayers who stand up to CRA, whether the reassessment is regarding a tax shelter refund, or a child care deduction, or whatever. As high as 90% of taxpayers who receive a Notice of Reassessment simply pay it, out of fear, or they don’t want the hassle. Pretty strong incentive for CRA to send out reassessments that may not stand up to a dispute or an appeal, isn’t it? Heck, if I knew that 90% of people I sent intimidating letters to, asking them to send me a cheque, would actually pay me, I might be tempted to do it too!
AnotherCOIPer, did you file your Notice of Objection (NOO) for your 2007 Notice of Reassessment (NOR)? You have 90 days to do so, from the date you received your Reassessment. If you don’t file your NOO, then the legal defence fund that COIP has in trust with a Toronto law firm won’t be able to include you in their suit against the CRA should they persist in their claim that the tax shelter is non-compliant. Once you file your NOO, the CRA is not allowed to contact you or continue to send threatening letters. Please have a look at this website (totally unaffiliated with me or this blog post) for more information from a firm specializing in tax law http://loophole.ca/tax_seminars.html
If CRA does continue to contact you, do make sure that you record the details of the exchange and file it. It could be helpful to the lawyers hired to represent you.
CRA’s collection department has been known to withhold refunds from later tax years, which makes sense for them to do if you don’t file your NOO. (By the way, you should have received correspondence with regard to filing your NOO – all 2007 donors were mailed this at the end of February 2010. If you didn’t receive one, just contact the COIP office, they will help you.) Even people who have filed their 2007 NOO, if they then file their T1 info too soon after (within about a three week period) may get their 2009 refund “scooped” or withheld. The taxpayer must then contact CRA and let them know they did in fact file a NOO, and request their refund back. Of course CRA must then repay it to you, the taxpayer, plus interest, but they will first advise you to make contact with the Chief of Appeals after 120 days, before they will reissue it. The process is, by design, highly inconvenient. CRA’s mandate is to collect as much tax as possible, and the intimidating and inconvenient process they put taxpayers through helps them achieve their goal.
What will happen to the disputed tax refund in the long run? Assuming there is enough cash in the legal defence fund (and there should be, by design) it is ultimately up to a tax court judge to decide whether the claim is compliant with the ITA or not. And the current law upholds tax avoidance – please consult the first right in the Taxpayers Bill of Rights “You have the right to receive entitlements, and to pay no more and no less than what is required by law.” And should it go to court, whichever way it is decided, will then be appealed by the side that loses. It can then be expected to be taken again to the supreme court for a final ruling. This whole process typically takes 7-12 years, all of which time you have your tax money working for you, if you have made wise use of it. If the tax shelter is ruled on as not-compliant with the Income Tax Act at the end of the day, then pay back your refund. There is no mention in any case law history that I am aware of where tax shelter participants in well-structured tax shelters have had to pay interest or penalties after the process of working its way through tax court.
That being said, well over 90% of such disputes settle out of court, and if the tax shelter structure is compliant with the Income Tax Act, the settlements, anecdotally speaking, have been in favour of tax shelter participants. This process of negotiation also takes several years, and again, anecdotally, interest and penalties have also not historically been applied. I received my information about this from a tax lawyer who specializes in tax shelter cases.
Anna and smartcookie, I’ll be happy to email you with my contact info and help answer whatever other questions I can. Well structured tax shelters are not for everyone, but they are a fit for some. Steve provided some solid explanations, thanks for that.
And Canadian Capitalist, I wanted to point to your comment on March 8th regarding the company that is selling warranties for another tax shelter program, I would be highly skeptical of their “proof” that interest and penalties were applied to the three cased that lost in tax court – their links just point to more of the same old news stories, not to case law. Remember, they are selling insurance…
So, where are all the commenters who were sure that the Orion Foundation was a fine charity?
The Canada Revenue Agency revokes the charitable status of The Orion Foundation
“The Canada Revenue Agency’s (CRA) audit has concluded that from January 1, 2005, to December 31, 2007, The Orion Foundation (the Organization) issued in excess of $91 million in receipts for medicine units received through the Canadian International Aid Program tax shelter arrangement. However, it is our position that receipts were issued for amounts far in excess of the actual value of the property. The Organization’s records fail to substantiate that the values recorded on the receipts were accurate, or that the property was actually received, used, or distributed in the quantities reported by it.
For its participation and tax-receipting abilities the Organization received approximately $1 million in cash. Of this amount, the majority was paid to another registered charity as compensation for its role in the arrangement, to related third party companies as administrative fees, and was also used for the personal benefit of directors. The Organization devoted only $70,000 to its own charitable purposes.
Our audit has also revealed insufficient separation between the Organization’s operations and the personal business and financial interests of those responsible for its operation. In particular, the Organization has entered into collusive contractual arrangements with directors and related parties who are themselves promoting the tax shelter programs. These arrangements have resulted in substantially all of the actual cash received being diverted into the hands of the promoters and related companies rather than used for charitable purposes.”
91 million in receipts issued.
19 million in revenue (est).
Actual charity? $70,000.
I’ll say it again. There was virtually no charity work being done here folks. Your just buying receipts at 20 cents on the dollar so you can cheat on your taxes. You know it, I know it and the government knows it.
Every one of those receipts is a lie and the government has every right to take the money back.
Wow, that was a lot of reading to do. I’m fairly confused by it all. For the time being I’m gonna wait and see if anybody like Steve or Anna come back with any words of enlightenment. I’d like to believe that one can do this, but I’m skeptical.
Can someone tell me what happen now with COIP. Are they being closed down totally by CRA
An entertaining and informative – although at times quite repetitive – read. My understanding so far is that the program is 100% legal.. for now. Most previous programs seem to become illegal once tested, which leads to believe that this one is at risk. As has been said, it’s not a matter of “if” the CRA will challenge it, but “when”. They will try to bully participants, but the NOO seems to be a good tool to ward them off. Even if the program is deemed illegal in the future, it would seem that thanks to the NOO, CRA can only recuperate the tax credits from the donations that are disallowed.
Looks like the upside is that with a little discipline you can keep that money around in case you need to pay back and earn capital gains/interest/whatever while it’s in your hands. In a better case scenario, the lawyers retained by MLF win and you keep everything. If MLF wins, I bet the law will be changed to make it illegal, because as has been said CRA cannot afford the existence of a program that legally allows the participants to save more money than it costs them.
On the downside, the program is not simple or easy to understand, which doesn’t help to make it feel kosher. I doubt many participants could explain how it works from A to Z. Also if MLF or FAST vanish into thin air before or during the trial, participants are screwed. In my eyes, there is much risk. MLF is in a position where they have nothing to lose, (in fact they have quite a lot to gain
) and all the risk is transferred to the participants.
I guess it all comes down to your tolerance to risk, your financial situation and how much you can put up with CRA. Personally, I were rich I’d have a team of lawyers/tax experts/accountants/you name it look at the program and I probably wouldn’t mind loosing a few feathers to CRA. But I’m just a middle-class guy trying to minimize his taxes. In the last 4-5 years I seriously considered but in the end did not participate in two programs, which at the time were legal, signed off by top law and accounting firms. Both programs have disappeared off the face of the Earth and I can only imagine what the participants had to go through or are still going through.
PS: And I thought I’d just post a few words to get new posts notifications.. Seems it’s hard not to be wordy in this thread.
PPS: Steve and Andro, please come back, don’t be Shy!
Concern: If tax credits as a result of donations to a tax shelter program like COIP or FAST are challenged by CRA and you receive a notice of reassessment, the issue for most people would be that taxes are withheld (deducted at source). Could CRA simply elect to not pay a refund or hold your money up until such time as an objection filed against a reassessment was resolved in court?
Quoting from CRA website: “Department of Finance had announced proposed changes to the Income Tax Act, on December 5, 2003, to limit the tax benefits from these arrangements.”
and
“It is the CRA’s position that the December 5, 2003 amendments apply to these arrangements and will reduce their associated tax benefits.”
Question: Does anyone know if these ‘proposed’ ammendments have been passed or the ‘position’ of CRA is in fact backed by legislation, or is CRA simply waving it about as blank ammunition in their arsenal to intimidate?
[...] there. That’s precisely what promoters behind tax shelter gifting arrangements claim (see Beware of tax shelter donation arrangements, 19 August 2008) and the CRA has a long record of reassessing taxpayers and denying the [...]
Has anyone actually had to pay the tax man? ie: the 35K mentioned above.
Wow there are a lot of people on here who speak when they don’t know anything about this, especially this Cynical dude. Its simple, go to a Fight Aids, Save Taxes seminar. They explain this in very good detail, they being a fella who was a tax auditor for the CRA for 20 years. Yes you WILL get audited, you being the tax shelter you are in, not you personally. After filing your return, you will become what the CRA calls an agressive tax payer and you will receive an audit notice which F.A.S.T. will help you fill out. This is more of a scare tactic, especially to those who are unaware how to handle the audit, this is nothing to be afraid of. Yes you donate to a charity which buys medicine for AIDS in Africa or Haiti. You take a loan and pay the 4 years of interest upfront. You get a tax receipt for the total loan ammount. How the money is actually used is more complicated but say you owe someone $20000 and the person you owe says that instead of paying him back, he wants you to the money back by buying him 20000 liters of gasoline. You of course say sure! Now you go over seas and buy the gas for 10 cents a liter. He gets his 20000 liters of gas and you get off by saving thousands of dollars to get it. This is sort of how it works to buy medicine. Like I said, before passing judgement, research this more, go to a seminar. This is type of tax shelter is 100% legal but in the end, its simple, if its not for you, don’t do it.
If you live in the Toronto area and have participated in a charity tax shelter in the past and have been reassessed by the CRA, a CBC reporter is interested in speaking with you. Contact me and I’ll put you in touch with him:
http://www.canadiancapitalist.com/contact
i plan intaking part next year.. my dad did this year.. i have read this from 2 times now.. and boy is their a lot a stud replay buy some unamed people….however steve it be nices to see another comment yet by you on here.. ill probly reply again. i would like to get a hold of all some of those emails people been talking about… i guess i need to scan thre one more time.. cause i cant rember right now what onces i wanted…. i read this article back in july.. after going to those semminares.. and ive been to 4.. very informative…it was nice i went with my dad to his meeting with one of the guys.. we had a 3 hour conversation.. cleared a lot up… then im impressed .. i told him i was on ei for this year.. and might consider for next year. when i get hired again..since im in a construction trade.. they still said ya sure come down.. i brought my girlfreind.. and we had another 2 hour conversation.. i convensed my girlfriend half way.. un fortanly she only learned what she knows from me.. and missed the first 3 semenares. but said .. this guy helped her to understand it better.. so i guess i have more semminares to go to..get her on board. i cant really do this with out her suport. well i could. but i rather have her on board now.. then try and get her on board later…lot of the doctuments posted by cynic just suport what i was told the cra would do..in the seminars and by steve….. i also love the one where some posted that coip is in trouble… i read that…. THE CRA SAID MANY TIMES IN THAT ARTICLE IN ARE OPION>>>>>> reinforsing the fact that the cra though is disalowing the donation, and recalling the money.. thats based on their opion… how is it so many canadains see a CRA’s opion and go on no he belive s in his opion i owe hime 10$…. if you give a teller $20.00 they sometimes make mistakes and say you only give them $10.. do you right away say your right. and give them $10 more…NOOO you look in your wallet.. and double check.. and make a fuss.. if your honest and know their wrong.. its a hard to win sometimes.. and that what the cra is hoping you dont want to fight that battle… and yess i know this isnt a good example…..anna hurd anything since you filed your NOO on your reassement? o but i do have a great example you can choise to belive me if im not.. ture story happend to my dad my numbers might not be exact.. but it proves the cra dosnt charge intrest while in court…. ok so back in 1989 when i was 4 years old. my dad worked for the airlines.. they sent him up to rankin inlit( back when it was still NWT) not Nunavut like it is now… we moved to yellowknife (capitol of NWT) in 1991 they transfred him yet again.. the goverment was debating a law back in 89 about how if you live in housing supplied by your employeir it should be taxed.. damb them taxing everything agian.. anyway so they passed it in 91.. and back dated the tax rulling .. my dad gets a notise of astment in 92 0r 93 that he owes $29,000 in back taxes due to the fact he didnt pay any on that nice house the airlines supiled.. now heres the thing is my dad was make not much more then min wage.. and in rakin in 89 milk was almost 4$ a litter based on the fact you could only fly things in no roads in or out.. the cost of living was overinflated.. we were given a coupany house to live in 2 bedroom nothing fancy.. but they thing cost $4000 a mounth plus utilities ( bassed on the fact the it was being rented to that company) so my dad said woa wait a min.. that is unreasonable…i wount pay im taking this to court.. Noo was filed…so my dad desbustes .. he puts uses the tax law that say you cant cause undue hardship… and this amount is very high.. they siad how is this high prove it…1.. cost of living is higher in rankin then the avrage candian city or town, camparied to wages 2. their is vertually no renatle housing aviable.. so they can charge outrages prices, 3 my wage would have never cover the cost of those bills.. they say yes sir you are right… however thought this may be undue hard ship, we cant make exceptions for one person, so what we can do is use what you used to to defend your case. yes it is high then the avrage. so we will base this amount off the avrage for people with that wage ect…. so 3 years in court a juge ruled the amount be reduced from 29K to 14K still high but less then half` and didn charge him intrest or fees so in 97 he had to pay.. proving that while a their is a descion being made you are not charged intrestes and fees… it would make sences too.. because you have right to object, because they can make mistakes.. or over charge… so why should you be penlized for for using your right to object, a reasonable cause… witch is by the way. that i used my loan/ credi card to by these pill worth x dollars.. and the money i get back i invest with pay off morgage sitmulate the economey save lives in africa. just thought i thorow that out their
sorry for any spelling or grammer issues. it is very late
Hi interesting stuff, i enjoyed your post. Yes people are scared. to be honest it is always on the back of my mind and yes i will fight the CRA. I will not settle nor pay a dime unless this is final. I have not heard anything back from the CRA since sending in my NOO.
I wish steve would come back just to answer some additional questions i have….
I just received a form letter from COIP/PanAggregate that asks me to pick one of four options regarding my interest balance and applying it to the purchase of pharmaceuticals. In reviewing the document it looks like the preferred option is Option 1. Just looking for some direction as my accountant is on vacation. Not planning on acting before then but just curious if this form has any hidden role in all of this or if it’s just the final step in settling the loan agreement. I was a 2006 participant if that makes any difference.
I just realized that there is another “Steve” posting on here who evidently gets a lot of mail. I’m not him lol. I will change my screen name to Steve D so we don’t get confused.
so steve D you took part in coip for 2006… how has the whole process been? and the CRA what did they do if anything?
The whole process is pretty much as described. In a nutshell, CRA has disallowed the charitable deduction, COIP has filed the NOO and now we wait. I was sent my notice of reassessment and have paid back the tax savings. At this point I am out the cost of the original investment in the program and await the outcome of the legal proceedings. I chose to pay CRA to avoid the interest penalties that will accrue if the NOO fails. I have had reviews with them before and where I have won, they have paid me interest, where I have lost I pay them. There is no getting around that and any fantasy about a loss being handled with pennies on the dollar is a fools dream. Also, you have only one account with CRA and you carry the balance owing forward. If you are making monthly or annual remittances for your taxes or in the case of a possible refund, CRA can, will and have taken these ammounts and applied them to your total owing ie. what they believe you owe them from the disallowed COIP program. Ultimately, it is my hope and belief that the NOO can be successful if in fact they have sufficient funds to mount and continue the legal fight. I do also believe that if we are successful, the tax act will be changed to specifically disallow any future programs of this type.
Anyways, just my experiences and thoughts.
so when you say you paid back and “out the cost of the original investment” are you talking about the loan to get the tax credit is the amount your out?(meaning you paid back the tax credit?) so why did you pay back before a court decisson is made? my dad had fight with a CRA and no intrest was charged well they made a decisson..as i posted earlier..with the NOO being filed, CRA can still take whats owing out of next tax season?
I did not pay anything as I have the funds locked in for 5years. So far in history there has been neither interest nor penalty charged back. They only start to charge you interest once the case has been settled and you don’t pay on time. I’ve done my due diligence! I also think that COIP will fight and if we do have to pay back it will be very little.. I spent lots of time researching tax shelter before i made adonation and COIP was the way to go.
ok that make more sences now… cause i been dooing a lot of research my self, and the mission life and fight aids… seems very well structured…as far as i know coip is no longer offered in 2009… what i was told by a fast track employee.. the reason for the change in the program, was to fine tune it to newer tax laws, so that they would have a program to offer still complaint with current tax laws.. i asked him how this would effect coip. i was told it wouldnt, because coip was complaint befor the change. i had two meetings with fast track employee’s..one was just to tag along with my dad..when he was enquireing.. and i meet with a diffrent guy.. i can only rember one name, marcel. they seem like they know what they’re talking about.. and i looked around the net, and havent found any negative feedback from a person who “”"has taken part in thier program”"”… i also noticed that Darren Weeks was on the news just before the 2010 vancover olympics.. he had purchesd (or sponsored) the candian bob sled team for the next 5 years.. i’ll also be attending two more seminars, this week and next week..im pretty sure my minds already made up about partaking in fight aids, i appricate your help and answers anna..
If you lose in court you will pay interest and penalties going back to the year assessed.
Three things to ask yourself before investing, intresting stuff.
1) Have you talked to a Chartered Accountant or tax lawyer about investing in this?
2) Has anyone ever won in court with this type of arrangement. If not, why do you think you can?
3) If you don’t understand simple things like how to spell words like interesting or sense, how can you understand complicated matters like income tax law?
ill look into intrest and penalties from a loss in court.. before i comment on that
1) i’ll look into a charter acount scam hater.. thank you
2) another great question is why have not all tax shelters gone to court? CRA cant aford to lose(or else all candians would partake)
Im looking for the 5 to 14 years of intrest free loan to invest with, if the rich can do it, why cant i (or us liitle guys)
3) i may have a weekness in spelling, but that dosnt not effect my ability to understand.. if you choces to belive me or not, no need to make the blog a fight of persons abilitys
but thanks for the questions
Intresting (sic) Stuff:
Some tax shelters don’t go to court because they are legitimate, thus the taxpayer is allowed the deduction or tax credit. The charitable donations ones are reassessed because they are not legitimate. The taxpayers can choose to file a notice of objection, and then take it to court. It has nothing to do with Canada Revenue Agency not being able to afford to lose.
What I was saying is how many of these type of arrangements have won in court? Canada Revenue Agency usually wins.
Speaking of court, I see here that a major class action lawsuit has been launched against the Parklane Group for the losses its investors suffered. If this sort of tax shelter was legitimate, would that happen?
http://www.thetorontolawyers.ca/PDFs/Further%20Fresh%20as%20Amended%20Statement%20of%20Claim-May%205-10.PDF
Some of you people might want to contact Sam Marr and join the lawsuit.
I have had a CRA tax shelter review in past which disallowed part of the credit which I had received. Yes, they want interest from day one and not just from the point at which the decision was made. They wont be giving anyone an “interest free loan” if the shelter is found to be flawed in a tax court. You will pay tax effective from the date on which you wrongly received your credit (in theirs and the courts eyes). As I’ve been through this I chose to pay them back while this thing plays itself out in court to avoid those interest fees. If we are successful I expect to receive interest on the money they have withheld from me. I have received interest on debated amounts in past where I have made my case successfully. To Anna, I appreciate that you feel you have done your due diligence but if someone has told you that you will pay “very little” back if the case fails, then you have been misled unless you consider the total amount of the tax benefit received as being “very little”. This isn’t bankruptcy court or something. You will be required to pay what you owe. You may not want to hear that, certainly I love your take on things, but it doesn’t work that way in the tax system. Even bankruptcy cannot totally protect you from the tax man. Again, hopefully all works in our favour and I’m glad to hear you have your credits tucked away in an investment that is hopefully gaining in value enough to cover any interest that you might eventually be liable for. If it’s a good investment, even if the case fails, you may be up a buck or two.
We are not talking about Parklane. Our discussions are about COIP. COIP is a totally different structure.
There is no need to insult anyone. We are hear to exchange thoughts and inform ourselves on COIP and Missionlife.
Steve D. Which tax Shelter did you contribute in the past that you had to give back part of the credit you received? I am assuming I will have to give back around 30-40%. My friend also donated to a tax shelter and she had to give back 35% with no interest nor penalties. It was settled out of court.
Just to clarify, to be up the “buck or two” I alluded to, you would need to make back not only the possible interest penalties but also enough to cover your initial investment which is lost if the court case fails. As most COIP/Orion investors invested about 10 to 15 thousand in the program (original cost for 8 to 10 units plus Orion foundation donation) you need a pretty good investment to make up that loss with the twenty-five to thirty thousand that you received in credit. I’m not saying that it’s impossible, just that you really need to have some great investments.
I can not believe the ridiculous conversations in this thread. Everyone seems to want something for nothing and is astonished when they are called on it. Don’t give me that “charity” crap. What people want is to put $1 in and receive $4 back, justifying it all by saying they are really just being philanthropic. I like to pay less tax as well but I sure don’t get caught up in this bunk. Don’t be surprised when the tax man has at you.
The legislation seems to revolve around the assumption that no gift will be made:
“Furthermore, as indicated above, completed audits have shown that there was effectively no gift being made in many cases”.
My question is: what if a gift IS made?
The final word on why the supposedly bulletproof COIP and FAST are destined to be doomed.
CRA ruling on COIP tax shelter: http://issuu.com/taxy/docs/coipcraruling
http://www.thestar.com/news/investigations/charities/article/807607–charity-closed-after-bad-books-revealed
@Eric: Thanks for the Toronto Star article. I guess that the old saw about if it’s too good to be true, it probably is applies in this case. Incredible that CRA says that just $10,000 out of $91 million seem to have gone to charities.
Our law firm has commenced a class action for tax shelters that operated by means of leveraged donations, which in turn resulted in reassessments disallowing those donations.
See http://www.trinityclassaction.com/ .
Give us a call on the general line if you’d like to speak about your CRA dis-allowance resulting from this or a similar tax shelter, or to my direct line at (519)561-6257.
IF you pay TAXES you must read this book, The TAX COLLECTORS Bible
http://www.taxcollectorsbible.com is written by Alan Baggett a former CRA tax collector who after 8 years of working for the agency got so disgusted with his job and his colleagues criminal behaviour that he decided to resign and write this tell all book exposing CRA limitation and empowering the tax paying public.. The book contains over 400 pages of information the CRA does not want you to know. After reading this book you will never be afraid of CRA again. Here is a partial list of some of the things you will learn in this book. I couldn’t stop reading from the moment I picked it up.
How to defend yourself from CRA’s Criminal and Unethical practices
How to access the CRA’s secret files on you!
How to audit the auditor
Being audited? Learn how you can audit your CRA auditor
T4 Horror stories – told by CRA employees
How to Protect your assets from an overzealous tax collector
What to do if you get Reassessed
How does the tax collector locate your assets
Can the CRA search your real property
Learn how the CRA can saddle you with your neighbour’s tax debt
How to get certain tax debts written off.
http://www.taxcollectorsbible.com
Happy Reading
[...] Beware of tax shelter donation arrangements [...]
it’s true; many programs out there are probably “Scams” but remember there are very legitimate tax shelter programs that have been running for years that really do promote a “loophole” or strategy for their clients.
Think people! – Tax avoidance programs are very LEGAL but display virtually no advantage to the CRA and their “business”. The CRA like any business has an agenda; now imagine if your business depended on the public paying their taxes, you will do anything in your power to make any program which gets in the way go down. And trust me the CRA has the money to do so.
Remember tax shelters are legal for a reason. But make sure you RESEARCH extensively and choose a legitimate program. I’ve spoken with many agents from various companies on such programs and all offer various packages. I’ve been in talks with “The VIA Project” (http://www.viaproject.ca/) one because I was referred by a friend and second it’s close to home.
Do your research, and choose a program right for you; don’t believe everything the CRA tells you. Focus on the LAW.
Contrary to what Mr. Jovicic says, tax avoidance programs are not legal. The General Anti-Avoidance Rule (GAAR), set out in Section 245 of the Income Tax Act, makes a series of abusive transactions arranged primarily the tax benefit illegal. See http://www.taxpage.com/tax-tips/General-Anti-Avoidance-Rule%28GAAR%29.htm . People are allowed, however, to legally arrange their affairs in a manner than minimizes tax.
This Via project looks like an attempt to sell art, but probably not a scam. I don’t really see where the big tax advantage is, nor do the promoters provide either a projection claiming such, or a legal opinion from a reputable tax law firm. I am concerned that the promoters don’t include a reputable CA or tax lawyer.
Why not just donate stocks or mutual funds with a gain to the charity of your choice? You will not be taxed on the gain, but get the full value of the proceeds as a tax credit. Of course you would be further ahead to keep the proceeds yourself, but if you are the type of person who makes large donations, this is the best way to do it.
@Canadian Capitalist
Hey,
How does one get out of this loan agreement thru mission life financial once the paper work is signed, less than 15 days ago?
Please email me at netsirc-at-hotmail-dot-com thank you
Hello all,
I’d be happy to help or answer any questions involving Tax Shelters or the specific programs of Mission Life and GLGI.
Disclosures:
I do work for Fast Track.
I don’t care weather or not you participate.
I do care about making sure you have accurate information and expectations.
From some of the comments I think some people have the idea that the CRA has more power then the CIA, FBI, Delta Force and The Justice League combined. They are just a government agency, like any other, and they rely on the fact that if you want to fight them you are looking at a $200,000 (minimum) court battle, pretty heavily.
Mission Life is properly structured 3rd Generation Tax Shelter. Is participating a risk, yes, so is crossing the street. Is it a gamble, no, while we don’t know what the eventual court decision will be, the programs follow the letter of the law (CRA’s opinions are not Tax law, and are not unbiased).
Each person must decide how to arrange their own finances, I don’t begrudge anyone who doesn’t want to
participate is a Tax Shelter. I do think that the Richest Canadians use Tax Strategies to save or deffer Taxes to their advantage and I think we should do the same.
Thank you,
@Khalid: It belies common sense that those of you promoting tax shelters would still be claiming that these donation schemes are “properly structured” when so many have either been (a) challenged and won by the CRA or (b) proven to outright frauds. The simple fact that a $1,000 donation generates a $4,000 receipt is enough of a red flag. It was a big red flag with Fight AIDS Save Taxes and it still remains a big red flag.
Canadian Capitalist, You are absolutely correct.
It is impossible for a $1000 dollar donation to produce a $4000 donation receipt. Anyone who tells you that can happen is lying to you.
In order to get a $4000 donation receipt (and therefore a $2000 tax credit, in Alberta) you would need to donate $4000. A donation receipt must follow this formula:
$1 in donation (Cash or Property) = $1 Donation receipt
If you make the donation via cash, credit card, line of credit, property, or financing it makes no difference.
Some tax shelters are challenged in court, those that are not properly structured lose, usually very quickly. Those that are properly structured usually settle, neither side wants to risk losing, an indication of a properly structured Shelter is how long CRA takes to take them to court.
Some Tax Shelters have lost to CRA, but unless you read the actual court decision it can be hard to tell what actually happened. For example one of the GLGI donors was taken to court, CRA didn’t have its act together and agreed to a “Consent to Judgment” which favoured the donors totally (as in no repayment). However as this case was not argued in front of a Judge it does not set any precedent. CRA spun that one as a victory as the donors “Consented to Judgment”.
From the COIP program the 2006 donor that filed Notices of Objection in 2009 have yet to hear anything from CRA (If anyone has please let me know so we can get you the proper help).
I am always happy to answer any questions you have. I enjoy talking about these subjects.
@Khalid: I have no interest in rehashing discussions on what’s a donation and what it not and what’s a “properly structured shelter” and what’s not. The trail of comments here over the years speaks volumes. As lawyer Mark Blumberg points out if Canadians want to be a glutton for punishment, by all means, they should go ahead and “invest” in a charity tax shelter.
http://www.canadiancharitylaw.ca/index.php/blog/comments/canadian_charity_donation_tax_shelters_make_no_financial_sense_or_any_other/
That’s fine we don’t have to rehash anything. I don’t want to even try to change your belief that Tax strategy’s don’t work.
If anyone else has any questions, or wants to have a discussion I’d be happy to engage them.
I would like to point out though that both Tax Strategy’s that we offer have a standing reward of $10,000 to anyone who can prove that they are not compliant with the Income Tax Act. You would think that those who oppose these programs would be lining up to prove that don’t work and collecting a nice bounty in the process.
Please send me your contact info –4friends1972@ libero.it
Registered Tax Shelters= losers ( voice of experience) promotors pocket the money. Note the pattern they start a new one every three years after theCRA audit for the next group of suckers You can’t say you were not warned. You think paying tax is expensive wait til you been reassessed, not to mention the sleepless nights.
The cra is complicit in these scams. They should stop pretending that they are not. They collected at least $40 000 in interest from me alone and I haven’t finished paying them back yet.
The cra could easily shut all these schemes down simply by requiring that all of them be approved first before they are allowed to go to the public seeking donations. They could at least push for legislation requiring such. They don’t because the schemes are every bit as much a moneymaker for the cra as they are for thre promoters.
Aw, taxtrouble…Why so sad? You sure were all smiles and chuckles when you got that big refund! Telling all your friends about how you beat the tax man. Funny how the story changes. Now its all his fault.
Khalid, whats your email address, I would like to get in touch with you?