CRA Comes Down Hard on Charitable Donation Scheme

On March 5, the CRA announced that it had revoked the registered charity status of the Francis Jude Wilson Foundation, effective February 23, 2008.

According to the CRA press release, the Foundation had stuctured its affairs for the private benefit of a tax shelter and its promoters. The Foundation had issued $10,560,650 in charitable donation receipt during 2005 and 2006 but had only actual cash returns of $105,667 and paid professional fees of $234,855 to the tax shelter promoters.

In addition, the CRA cited the foundation's failure to act in the best interests of the Charity by choosing prudent investments in favour of those selected and arranged by the tax shelter as evidence that a collateral, if not a primary purpose of the Foundation was to support and promote the tax shelter rather than its charitable activities.

The Foundation may no longer issue charitable donation receipts and the CRA indicates that it may be liable for income tax equal to the full value of its remaining assets.

In Taxpayer Alert issued last August, the CRA warned taxpayers "Participating in tax shelter gifting arrangements is likely to result in a tax bill!"  In that Alert, they indicated that they were auditing all gifting arrangements and offered the following startling facts:
  • To date, the CRA has reassessed over 26,000 taxpayers who participated in these schemes, and denied about $1.4 billion in donations claimed.
  • Audits of another 20,000 taxpayers involving $550 million in donation claims are just about complete.
  • Audits on other arrangements involving over 50,000 taxpayers are about to begin.