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Art-flip Tax Reduction Schemes - Not What They Really Seem
In a recent decision of the Ontario Supreme Court, a couple successfully sued their accountant over breaching his fiduciary duties when he advised them to engage in a "art-flip" tax reduction scheme for which they received large tax savings. However, the Canadian Revenue Agency (CRA) disallowed al the benefits they received on the basis that the tax benefit must be based on the actual purchase price paid for the artwork and not the purported appraised value when the art is donated. Taxand Canada explains what these so called art-flip tax reduction schemes actually entail and how best to approach them.
This case raises important issues for taxpayers who participate in these and other charitable tax avoidance schemes, and their advisors. Clearly, this case confirms that a financial and tax advisor with a long-standing client relationship has a fiduciary duty to that client. Therefore, the adviser has an obligation to put the client's interests first. Consequently, when it comes to aggressive, if not dubious, tax planning, an advisor should be watchful and prudent in safeguarding the client's interest.
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