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Illegal Tax Shelters With Tax Shelter I.D. Numbers and Tax Farming


These are illegal tax shelters that have been identified and given an ID number by CRA in order to identify them as such. This does not mean they are legal. In fact it means the opposite. They have been identified as an illegal tax shelter. The promoters of these shelters have been exemplified from criminal prosecution for promoting an illegal tax shelter because they are registered and required to submit a list of their clients to the CRA. CRA typically withholds investigation for three years to inflict the greatest amount of financial harm to the tax payer. CRA refers to this as tax farming. CRA is in the business of tax farming and do this to maximize the amount they can farm.

Over appraised gifting arrangements

An over appraised gifting arrangement is a case where a taxpayer either makes or arranges to make a charitable donation through a third party. This third party purchases some sort of good, gets it appraised at 2-300 times its fair market value, and then donates it to a charitable organization. This organization then provides a donation receipt to the taxpayer for the appraised value, which is 2-300 times the fair market value. The charitable organization rebates an average of 95% of the cash donations that it receives to the marketer or promoter as a marketing cost.

Originally the maximum that could be donated and claimed was 20%. Then in 1996 they raised it to 50%. Then in 1997 they raised it to 75%. This effectively opened the flood gates for false gifting arrangement schemes.

All three of the examples of gifting arrangement schemes in this section are tolerated by CRA because they are Tax Farming the tax payer.

Example of Tax Farming:

CRA purposely planned to maximize the amount of money they could collect from a tax payer who would participate in these gifting arrangements. And in order to do so they had to allow the tax payer to participate for a minimum of three years without any interference or investigative procedures in order to lure the tax payer into a false sense of security with these gifting arrangements. Then by the third year they would investigate or pretend they were investigating by sending out questionnaires about the gifting arrangement program that CRA in fact issued the tax shelter ID number on in the first place.

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