Canadian Humanitarian Trusts

[bigfish90210]

hi all!

With the recent change in trust laws does anyone know how it will apply to the Canadian Humanitarian Trust (http://www.canadian-humanitarian-trust.blogspot.com/) program?

The CHT or CGI (canadian gift initiatives) program has been running successfully for some time. I just wonder what this will do to it.





Anyone know?




Thanks.

[TrevorK]

As far as I know, CHT has only been running for 2 years as it is. It's other derivatives were caught by the CCRA.

As well, the CCRA explicitly states that these sort of programs it considers against the Income Tax Act, so there's no guarentee that you won't get audited in the future.


Further, I would assume since Flaherty's big beef is with tax dollars disappearing he'll try to hit these sort of scams hard. Who knows what the effect will be, but he's trying to cut out all the loopholes.

[bigfish90210]

I think the CHT (http://www.canadian-humanitarian-trust.blogspot.com/) has replaced the CGI or canadian gift initiatives, right?

If so, was it changed to be within canadian law? My understanding is that the CRA is ok with it. CRA's statement is here (http://canadian-humanitarian-trust.blogspot.com/2006/04/what-canadian-revenue-has-to-say-about.html)

I have heard of several people who have participated in the past few years get audited. They said that REV Can just wanted to see the paperwork. Once they showed them they weren't heard of again.

Has anyone else had any experience with this program?

[TrevorK]

Originally posted by bigfish90210
If so, was it changed to be within canadian law? My understanding is that the CRA is ok with it. CRA's statement is here (http://canadian-humanitarian-trust.blogspot.com/2006/04/what-canadian-revenue-has-to-say-about.html)


That blog you posted does not state the CCRA is OK with it by any means.

Current promotions

The CRA is aware that some donation arrangements continue to be promoted. Two such arrangements are identified as gifting trust arrangements and leveraged cash donations. It is the CRA's position that the December 5, 2003 amendments apply to these arrangements and will reduce their associated tax benefits.

Gifting trust arrangements

In these arrangements, the investor becomes a beneficiary of a trust and receives property as a distribution from the trust. Often, but not always, the property has a lien attached. The investor then donates the property along with an amount of cash (to pay off the lien where applicable) to a registered charity and receives a donation receipt for the total of the cash and purported fair market value of the property. Typically, the total cash paid by the investor is about 30% of the amount on the donation receipt.

The December 5, 2003 amendments provide that the donation amount on which the tax credit is based will be reduced by any "advantage" that is in any way related to the gift. It is the CRA's position that the receipt of such property from the trust is such an advantage, and the donation amount will be reduced accordingly.

Leveraged cash donations

These arrangements involve an investor applying for and receiving a loan to facilitate a cash donation (comprising the investor's own funds and the proceeds from the loan) to a charity. Usually, the investor makes another cash payment to the promoter or another entity as an investment, and the investment will be used to repay the loan. Typically, the total cash paid by the investor is about 30% of the amount on the donation receipt.

As explained above, the December 5, 2003 amendments reduce the donation by the amount of any advantage. The definition of advantage for this purpose includes a limited-recourse debt in respect of the donation. A limited-recourse debt is broadly defined to include any unpaid amounts if there is a guarantee, security, or similar indemnity or covenant in respect of the debt. It is the CRA's position that debts incurred as part of a leveraged cash donation constitute limited-recourse debts if they are to be repaid under such arrangements structured as part of the donation arrangement. The donation amount will be reduced accordingly.
http://www.cra-arc.gc.ca/newsroom/factsheets/2004/nov/1125tax-e.html

[bigfish90210]

Originally posted by bigfish90210
I think the CHT (http://www.canadian-humanitarian-trust.blogspot.com/) has replaced the CGI or canadian gift initiatives, right?

If so, was it changed to be within canadian law? My understanding is that the CRA is ok with it. CRA's statement is here (http://canadian-humanitarian-trust.blogspot.com/2006/04/what-canadian-revenue-has-to-say-about.html)


What I meant is that the CGI was changed to a trust to comply with the Canadian law regarding gifts and donations.