Those who have had the misfortune to participate in tax shelters gone wrong some times complain that the CRA did not do enough to warn the public about the pitfalls associated with them. The CRA appears to be trying to remedy the deficiency with a rather stern warning about participating in a gifting arrangement.
The CRA’s alert is saying what tax practitioners have known for quite some time: the CRA (and the Department of Finance for that matter) hate donation tax shelters and if you participate in a shelter, then the CRA will almost certainly reassess you for your trouble. Of course, the courts might yet agree that a particular shelter actually delivers what it promises—although the shelter record so far is not encouraging. The point, however, is that in the face of CRA hostility to these programs you will likely need to take the matter to court to claim the full credit promised by the shelter. In which case, given that the results of a tax case are never certain, the CRA seems to be saying that you just have to ask yourself one question: do you feel lucky?
The CRA alert also mentions the application of penalties. In fact, the CRA has not usually imposed penalties on shelter participants, perhaps because they relied on professional opinions. The CRA has not always been so shy about imposing penalties, however, and in at least one case of which the writer is aware the Tax Court upheld penalties imposed on an unsophisticated taxpayer who became involved in a shelter where no opinion was provided.
