Canada’s Finance Minister John Manley announced last week fresh amendments to the Income Tax Act designed to limit the tax benefits associated with charitable donations, which the government says are being abused by marketers of tax shelter schemes.
The proposed amendments are in response to concerns over so-called ‘buy low, donate high’ schemes in which a taxpayer is encouraged to donate property to a charity claiming a value far in excess of its acquisition costs.
“As of 6:00 p.m. EST on December 5, 2003, the value of a gift of property for charitable donation purposes will be limited to a donor’s cost of the property, where it is donated within three years of acquisition by the donor or is otherwise acquired through a gifting arrangement or in contemplation of donation,” the Finance Department said in a statement.
The Minister also released draft amendments relating to limited-recourse debt and "split-receipting." These measures implement proposals introduced in Budget 2003 that address charitable donation arrangements that were promoted in recent years involving the use of limited-recourse debt. The draft amendments also incorporate changes put forward in December 2002 relating to the right to receive a benefit in respect of the donation.
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