What is a tax shelter?

The Income Tax Act defines "tax shelter" and "gifting arrangement" in subsection 237.1(1).

Generally, a tax shelter is:

  • a gifting arrangement described under paragraph (a) of Gifting arrangements or an investment in property (other than prescribed property or flow-through shares) where it is reasonable to consider, based on statements or representations made or proposed to be made in connection with the gifting arrangement or the property, that within the first four years of buying an investment in the property or entering into the gifting arrangement, the buyer or donor will have losses, deductions, or credits equal to or greater than the net cost of the original investment or of the property acquired under the gifting arrangement

"Net cost" is net of any prescribed benefits expected to be received or enjoyed, directly or indirectly, by the person or another person with whom the person does not deal at arm’s length.

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