Tax Shelter Alert
The Canada Revenue Agency is warning taxpayers about tax investment schemes that will increase tax losses. These investments are watched closely by the CRA and if reassessed there can be substantial penalties and interest charged.
The typical scenario is where a taxpayer buys a non-registered investment with large losses in excess of their investment. The loss usually results in a substantial tax refund. Typically, these are poor investments and they will often be reassessed by CRA. Do not be fooled by the fancy promotions that the promoters provide. If the tax shelter sounds too good then it is probably not.
If the Canada Revenue Agency denies the tax shelter deduction then the cash investment will also not be deductible since it was acquired to produce tax losses. If the taxpayer knowingly participated in a unregistered tax shelter to get a tax benefit, then the penalty could be an additional 50% of the taxes payable.
If you are involved in a tax shelter arrangement and want to avoid penalties, you can apply under the voluntary disclosure program before enforcement action has been taken against you. You will have to pay the taxes plus interest but will not face penalties and prosecution in the courts.