The canada revenue Agency says investors need to be wary of ads for tax shelter donation arrangements. The warning specifically mentions:

> “Buy low, donate high” arrangements. These were squashed by proposed retroactive legislative changes to the Income Tax Act. Any arrangements of this type that were sold after Dec. 5, 2003, will be caught by the amendments.

A“buy low, donate high”scheme occurs when a taxpayer buys art in bulk at low prices and donates it to an institution in return for a charitable tax donation receipt much higher in value than the purchase price. Shelter promoters usually broker the deals. The recipient of the art is usually a cultural or educational institution.

> Gifting trust arrangements. In these arrangements, the investor becomes a beneficiary of a trust set up by the promoter, and receives property as a distribution from the trust. Often, the property is highly leveraged. The investor then donates the property, along with an amount of cash that will pay off the mortgage, to a registered charity and receives a donation receipt for the value of the mortgage and the alleged fair market value of the property. Typically, says the CRA, the total cash paid by the investor is about 30% of the amount on the donation receipt.

> Leveraged cash donations. A popular donation arrangement type that sprung up after the “buy low, donate high” schemes were shut down is the leveraged donation scheme. The donor claims a tax receipt for an amount much larger than he or she actually donated. The extra amount that makes up the total donation claimed comes from the leverage scheme, which could include a loan from an offshore bank that will be paid off by an offshore insurance policy.

If your clients are involved in any of these schemes, they will be reassessed. All tax shelters are assigned a tax shelter number, so when the CRA uncovers an offside tax shelter on an individual tax return, it can easily track down the other participants. The CRA has three years from the date of your client’s initial assessment to do a reassessment. IE