Art donations
Donation of art to Canadian charities and other institutions is a legitimate charitable activity, which is encouraged by the Canadian tax system. However, the Canada Customs and Revenue Agency has concerns about certain art donation schemes and would like to warn taxpayers about the potential risks associated with such schemes.
What is an art donation scheme?
Individuals are offered the opportunity to get batches of artwork at a low price, generally around $200 to $300 per piece of art. Based on an arrangement made at the time of purchase between the promoter and the individual, the batches of artwork are donated to a registered charity or university. In return, the individual receives a donation receipt based on an appraisal arranged for by the promoter. The appraised value, usually $1,000 per piece of art, is substantially higher than the cost. When the donation receipt is claimed, it generates a tax saving greater than the individual's cost.
What is the position of the Canada Customs and Revenue Agency?
If the Canada Customs and Revenue Agency determines that the donation is not a true gift or that the appraisal value is inflated, the donation claimed will be disallowed or adjusted. Gross negligence penalties could also be applied if the circumstances call for them.
What should taxpayers do?
- Beware of advertisements that sell batches of art valued at several times their cost and promise substantial tax savings through charitable tax receipts.
- Ask for the details and certification of the appraiser to ensure that the appraiser is qualified and is an independent party not connected to the promoters or sellers of the art. Membership in a professional association is generally a good indication of an appraiser's qualifications.
- Pay attention to statements or professional opinions in the documents that explain the income tax consequences of the investment. Often, these opinions will tell the investor about the problems that can be expected and suggest that the investor get independent legal advice.
- Get assurances from the promoter or others in writing.
- Ask the promoter for a copy of any advance income tax rulings provided by the Canada Customs and Revenue Agency for investments and donations. Review the rulings carefully.
- Seek competent independent professional advice from a tax advisor before signing documents.
Do you need more information?
- For more information, contact the Canada Customs and Revenue Agency:
Individual inquiries:Contact the tax services office listed in the government pages of the telephone book.
Media inquiries:Call Michel Cléroux, Media Relations
Telephone: (613) 957-3504
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