As a PGC member and a Profitable Giving Specialist, I continue to do my due diligence on the issues arising with regard to the CRA and their reassessments of taxpayers who have participated in Registered Profitable Gifting Arrangements ( Tax Shelters ). As a former Appeals Officer with Revenue Canada for 8 years, and since I handled many Notices Of Objection that involved the Tax Shelter involving the Canadian Film Industry, I have continued to do my best to keep up with the results of many reassessments and court decisions with regard to Tax Shelters in general.
For the last 29 years I have operated an Income Tax Consulting business and specialize in Filing Notices of Objection for taxpayers. I also am representing some of those taxpayers in the Tax Court of Canada under the Informal Procedure .
In 2009 I got involved with 2 new Tax Shelter programs; namely- Relief Lending Group and Mission Life Financial. I did this because I saw them as the first revolutionary open-market structured programs . I believe they were and still are the most compliant programs available to the Canadian Taxpayer. I understood from the beginning that as a donor I would be reassessed, would have to file Notices of Objection and ultimately there would be a test case to the Federal Court because the CRA has and continues to view all tax shelters in the same manner. All of their proposal letters for all reassessed programs state that there is no valid gift, hence the taxpayers are not entitled to any tax credit.
This brings us to the latest tax shelter case: The Canadian Humanitarian Trust (CHT). The CRA has proposed a settlement offer to allow the cash portion only and to allow the donor/taxpayer to sign a waiver in order to have the interest waived on the remaining taxes owing. I look at this from the perspective of the CRA and also as a donor, although I did not participate in the CHT program. Since I have participated in RLG and MLF as previously mentioned it is obviously prudent for me to learn as much as possible from the positions taken by both the CRA and the promoters of CHT.
My initial comments that follow do not constitute legal advice but rather my views on how any of the facts and reasons outlined in the offer at hand may pertain to my participation in RLG and MLF and the process of dealing with the CRA regarding my own participation.
1. The CRA has obviously changed their position from their proposal letter and reassessments which disallowed all donations claimed. We can only speculate as to their reasons; however , it is , in my view , obvious that they did not want to argue their initial position in court. I view this as a positive as far as my participation in the tax shelters I have mentioned .
2. In the notes to the proposed settlement of the CHT case it states that: ...the CRA has not questioned the overall structure of the CHT program. It has challenged the validity of the Trusts, the chain of title of the pharmaceuticals, and the valuation of the pharmaceuticals . The chain of title and valuation issue raised is critical because we all now know that Federal Court cases have determined that for donation purposes a donor can get a tax credit only on his COST - that is now law. I find this very encouraging with regard to my participation in RLG and MLF as my donations in those programs were and are based on COST. That is how the program was structured .
3. The notes provided also indicated that the facts in the CHT Program are clearly distinguishable from those in any other donation program or recent case law. If that is the case , it would , in my view , be reasonable to believe that a court decision in this case would be different that the other court cases that have been considered in whether or not a donor should accept the CRA` offer. With regard to my participation in RLG and MLF, both of these programs are based on the open market structure and , as such, definitely are different than any other donation program . They are also based on the most recent Federal Court decisions regarding the validity of my gifts donated. And fortunately, the recent problematic activities of RLG and MLF do not affect my ultimate tax positon if I settle my debt in the proper manner.
Overall, my view is that the CHT donors have a difficult decision to accept or not accept the CRA`s offer and obviously each of the donors will consider their particular circumstances.
As far as the CRA is concerned in this issue, I point out that the comments I have noted above are relevant to my participation in the RLG and MLF Programs. It is my view that the arguments used by the CRA as outlined in their proposal letters for all Tax Shelter Programs (including the CHT case) are not valid with the Income Tax Act as well as Federal Court decisions for the open market structured programs.
Going forward, we, as taxpayers need only to come together and not allow the CRA to go beyond their extensive administrative authority to preclude all of us from exercising our inherent Taxpayer Bill of Rights. I would invite all taxpayers to join Profitable Giving Canada and be privy to the extensive due diligence done by many and actually see first hand the considerable work that has already been accomplished on behalf of taxpayers .Together, we can do what I cannot do alone. As a group of taxpayers with Profitable Giving Canada we can ultimately hold the CRA accountable for their actions which is how it is supposed to be in the first place.
Robert G Allen, Income Tax Consultant, Vernon BC