Commentary: Buying Low, Donating High: Arrangements, Programs, Schemes and Scams
Canadian Current Tax, Vol. 16, No. 10, July 2006
12 Pages Posted: 22 Jul 2013
Date Written: July 2006
Abstract
This article discusses recent Canadian judicial treatment of “buy low, donate high” programs, where a taxpayer buys property at a fraction of its appraised fair market value (FMV) and donates it in order to claim a tax credit for an amount greater than the price paid for the property. The Supreme Court of Canada refused to hear appeals in Nash v. Canada and Klotz v. Canada. The Federal Court of Appeal ruled that for such “buy low, donate high” schemes, the FMV to be credited to the taxpayer is to be the amount paid for the property. The commentary concludes by outlining section 248(35) of the Income Tax Act. Created in 2003, the section deems that the FMV of donated property will be the lesser of the donor's cost and the actual FMV, depending on the timing and purpose of the acquisition and donation of the property. While the author condones addressing abuse of the tax system with “buy low, donate high” programs and suggests that the government should have denied all tax relief in the case of donation schemes, she is concerned that section 248(35) may be overly broad when applied in cases of legitimate donations.
Keywords: buy low, donate high, Canada, Canadian, law, legal, tax, taxation, fair market value, donate, donation, charity, charitable, Income Tax Act, Supreme Court
Suggested Citation: Suggested Citation