Introducing the Art Flip and Other Too Good To Be True Schemes

For the most part when we write this column we are interested in the process that leads us along the road to solid financial planning. However, if it sounds too good to be true, it probably is.

The art flip is a name for a donation scheme where you purchase at a lower value and you donate at a higher value and you receive a tax receipt for the higher value donation. The essence of the art flip is to use existing tax laws regarding the allowable donation of personal use property with a cost or fair market value of not more than $1,000.
As an example a taxpayer would arrange to buy a piece of art valued at $1,000, but the price paid would be $250. The individual would then donate the art to a registered charity and receive a donation receipt of $1000. If you were to multiply this by several art pieces a person could have a huge tax savings.

CRA started to introduce tax legislation in 1999 to curtail this activity and as a result it will no longer be possible (as of Dec 2003) to donate in this manor. Currently CRA has reassessed over 5,000 Canadians who have claimed a charitable donation credit on art flips, combine this with penalties and the amount becomes 7 million in unpaid taxes.

CRA is looking at transactions that have one or more of the following characteristics.
* An arrangement that promises to sell items such as art, software or pharmaceuticals to taxpayers and such items are to be immediately donated to charities for tax receipts of a higher value than paid

* An appraiser that is not working independently of the promoters or sellers of the charity involved

* The fair market value seems to high

When it comes to these sorts of schemes it is buyer be ware. You can check on current fraud at www.rcmp.ca or PhoneBusters national call centre 1-888-495-8501.  CRA has a listing of current charities as well as a list of charities that have had their licenses revoked www.cra-arc.ga.ca/tax/charities/online_listings

Finally in the event that you are unsure of or question an investment you can e-mail me www.vold.financial.group@londonlife.com and I will work on verifying the proposal.

Shelly Vold CFP REBC
President  Vold Financial Group Inc.