Well, if you've never heard of the "Escarpment Biosphere Foundation Inc" how about something as apple pie All-American as the Little League?
http://www.thestar.com/sports/2009/01/1 ... tatus.html
http://m.theglobeandmail.com/sports/tax ... ice=mobile
The Little League of Canada had its tax donation status revoked for participating in one of these schemes. They went from writing a couple of hundred thousand a year in tax deductible donation receipts to $82,000,000 in total for the scheme. While they whined about how it wasn't fair they participated voluntarily. And they weren't alone. The Canada Revenue Agency revoked the charitable status of the Canadian Lacrosse Association ($60,700,000 in receipts), the Canadian Amateur Football Association ($20,000,000 in receipts) Wrestling Canada, and Biathlon Canada ($26,000,000 in receipts) for participating in the same scheme.
The charities thought they had found a gold mine but it all ended in tears:
http://www.canadianclassactionslaw.com/ ... ss-action/
There were dozens of these schemes, big bucks overall, and were all essentially the same. Parklane, which promoted the Trafalgar scheme, was particularly high profile. While the scheme was technically very complex (check above link) at heart it was very simple. Joe taxpayer would give a charity say $1,000 cash. In addition he would give the charity rights to a software program that Joe Taxpayer had received for free as the recipient of a trust. The charity would write a donation receipt for the $1,000 cash and a separate receipt for the claimed $3,000 value of the software program. Joe gets $4,000 in receipts for a $1,000 cost so his tax refund is well over his cash cost. The charity passes the funds on to the scheme promoters and gets a pittance for facilitating the scheme by writing the fake receipts. As the article above says:
The donor would write a cheque or make a pledge to a charity enrolled in the program. At the same time, the donor would apply to become a beneficiary of the Donations Canada Financial Trust (a private charitable trust created by Mr. Furtak). An escrow agreement would be executed by the donor appointing ParkLane (an Ontario corporation incorporated by Mr. Furtak for the purposes of promoting leveraged charitable donation programs, including the Gift Program, to Canadian taxpayers) to hold the trust units and to donate them to the designated charity on the donor’s behalf. After receiving the donor’s application, the Donations Canada Financial Trust made an “investment” in a sub-trust and was issued two units in the sub-trust which were then issued to ParkLane as escrow agent on behalf of the donor. The donor was given a confirmation of issuance of the “discretionary” interest in two sub-trust units with a perceived value of three times the donated amount. The sub-trust units would then be donated to the charity at which point the charity would have the original donation in cash and a piece of paper representing the value of the sub-trust units. The charity, under the terms of its agreement with the Gift Program, was then required to “redeem” the sub-trust units. The funds for the redemption were provided by the Bermuda Trust which “primed the pump by indirectly acquiring the sub-trust units, through Donations Canada Trust”. At this point the charity would have a total of four times the original donation in cash. Finally, in return for the donor’s total donations, he or she would receive two charitable donation receipts. A cash receipt for the amount donated and a donation in-kind-receipt for the stated value of the sub-trust units.
The CRA reassessed all of them and revoked the charitable status on a huge number of participating accommodating charities.
The suckers who participated in this were just average every-day taxpayers. Plumbers, cops, mailmen etc. There was absolutely no way they could have understood the complexities of the schemes. I dealt with this professionally as a CRA employee and I had problems figuring some of them out. The schemes at least partly relied on opinion letters from major Canadian law firms saying everything was A-OK under tax law. Turns out it wasn't and the screwed taxpayers got class-action certification in a few cases to go after the law firms. There have been some settlements but I haven't kept up with the status of them all.
http://www.canadianclassactionslaw.com/ ... ss-action/