Banka: Updating new donation tax benefit changes
Christmas is the season of giving—and in order to give and get a tax break you need to make a donation before Dec.31, 2011.
When you make a donation up to $200 you receive a 15 per cent tax credit which means that 15 per cent of that donation is deducted right off your taxes payable.
If the donation is over $200 you will receive a 29 per cent tax credit, so that is quite a savings.
There is also a provincial component to the deduction so you will save in federal taxes and provincial taxes.
There is also no ceiling to the amount that you can deduct, which is why there are so many donation schemes hatched every year.
If you don’t utilize your entire donation deduction in the current year, it will carry forward to be applied against your taxes for the next five years.
Also, if you find a donation receipt that you didn’t claim in the past five years you can claim it in the current year and you will still receive a deduction for it.
The rules for what you can donate were changed recently so that you can donate items as well as money and receive a tax receipt for the fair market value of the item that was donated.
This fair market value needs to be substantiated in some fashion.
For example, if you were donating a vehicle you could search the internet for the make and model to determine the current worth of the vehicle and receive a receipt using that as proof.
You would probably find a value for just about any donate-able item on the internet.
In order to get a tax break for what you have donated, you must receive a tax donation receipt and this receipt must have the business number of the charity on the receipt.
The Canada Revenue Agency has a website where you can check to see if you are dealing with a registered charity—www.cra-arc.gc.ca/chrts-gvng/lstngs/menu-eng.html.
This website will provide you with information on the charity and a description of the charity so that you can protect yourself if you think the charity may be participating in a scam.
Just recently, I received a flyer in the mail about a ‘Book Launch’ to do with some tax secrets made available by a former employee of the CRA.
Included in the flyer were four tickets to this event, so I rounded up three other professionals and we attended the event.
Upon arrival, it was evident that the event was actually to promote ‘The VIA Project’ which actually stands for Vintage Iconic Archives.
The sales pitch was for a tax shelter scheme that involves the public purchasing old photographs and then donating them to an unnamed Canadian University and receiving an inflated tax deduction for the effort.
The person must actually take out a loan for the purchase.
The two issues that CRA has used to stop schemes like this in the past were that the fair market values given to the products were inflated or if there was a loan involved, the loan was ‘forgiven’ at a lesser value.
The persons from VIA have stated that participants are required to repay the full value of the loan and that the Canadian Cultural Property Export Review Board is being utilized to determine the fair market value of the donations.
There were about 60 people in the room. The old rule still holds that ‘if it sounds too good to be true, it probably is.’
The CRA continues to crack down on the inflated donation receipt schemes and anyone that is considering this project needs to know that it may take up to three years, but eventually this scheme will be investigated and the donors will be reassessed.
Then you need to make a decision as to whether you would like to take it to court or pay the thousands of dollars that will have accumulated in penalties and interest.
There is an article on the reception of this project in Toronto posted on the Internet at www2.macleans.ca/2010/07/22/am-artful-scheme/.
I was more interested in the book but was disappointed to find that its most recent ‘data’ was actually from 2001 and the author did not know that the CRA phone support people must now introduce themselves and disclose their badge number.
I came to the conclusion that the book was too out of date and not worth the purchase.
When I did a search on the CRA charities website for ‘Via Project’ the match that is returned is something called the ‘Native Territories Avion Research Project.’
When I searched for the ‘Vintage Iconic Archives Project,’ there is no match found which indicates to me that this organization is not registered with the CRA.
Gabriele Banka is a Certified General Accountant and the owner of Banka & Company Inc.