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Notice: The information on this page is only for users of Personal Taxprep 2018. If you are using Personal Taxprep Classic 2018, consult the help available in the program. |
Fill in this form if you are an investor claiming a loss or deduction, a donation or political contribution deduction, or a tax credit for an interest in a tax shelter. We may verify and adjust your claim.
If you receive a T5003 slip (tax shelter), and a T5013 slip (partnership) or an official donation or political contribution slip for the same tax shelter, do not claim amounts more than once.
Under the Income Tax Act, we can apply a penalty of 50% of the understated tax if you make a false claim knowingly or in circumstances amounting to gross negligence.
Attach a completed copy of this form to your income tax and benefit return together with documents (a copy of your T5003 slip and the tax shelter's statement of earnings, or a copy of your T5013 slip) to support the amount you are claiming as a loss or deduction, a donation or political contribution deduction, or a tax credit.
You have to identify a tax shelter interest you bought after August 31, 1989, with a tax shelter identification number. You have to provide this number on your claim for any investment in the tax shelter you bought after that date.
For more information on how to complete this form, call 1-800-959-5525.
Tax shelters
Generally, a tax shelter is any of the following:
- an investment in property (other than a flow-through share or a prescribed property)
- a gifting arrangement
under which a person entering into any of the following arrangement:
- makes a gift to a qualified donee or makes a monetary contribution to a registered party, a registered association, or a candidate as those terms are defined in the Canada Elections Act
- incurs a limited-recourse debt that can reasonably be considered to relate to a gift to a qualified donee or to a monetary contribution
Generally, the investment in property or the gifting arrangement is a tax shelter if it is promoted as offering income tax savings and if it is reasonable to consider, based on statements or representations made or proposed to be made, 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. Further, it has to be reasonable to consider that the losses, deduction, or credits would be equal to or more than the cost of the original investment or of the property acquired under the gifting arrangement, 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.
The tax shelter rules for gifting arrangements generally apply to gifts, monetary contributions, and representations made and property acquired under the gifting arrangement after February 18, 2003.
Under the Income Tax Act, a tax shelter promoter has to get an identification number from the Canada Revenue Agency before selling the tax shelter. The number does not indicate that we guarantee any investment, or authorize any resulting tax benefits. We use this number for administrative purposes only. If you own a tax shelter, you have to give its identification number when you file a tax return.
We recognize that legitimate tax shelters are established for valid business reasons. However, we are concerned that some promoters sell tax shelters mainly to help taxpayers avoid paying taxes.
Investors should be cautious when considering a tax shelter investment if they suspect that it has these following features:
- a lack of business activity, or an activity with no reasonable expectation of profit
- unreasonable or inflated expenses, or overvalued assets
- limited-recourse financing, or financing arrangements that indefinitely defer an investor's payment
- losses for tax purposes will be more than the amount of the investment that is actually at risk
- the promoter or others are making verbal assurances of income tax consequences that are different from, or are not confirmed by, professional opinions contained in the investment documents
Tax benefits resulting from a tax shelter for a genuine business or investment are acceptable if they are reasonable and all other requirements of the Income Tax Act have been met. However, a tax shelter established only for a tax benefit (e.g., to generate a tax refund) may be unacceptable, and we may apply the general anti-avoidance rule of the Income Tax Act to deny the benefit being sought.
To ensure fairness in the tax system and prevent abuses through aggressive tax shelter promotions, we review and audit tax shelters. When we review a tax shelter, we determine if the tax shelter leads to an abusive application of the rules by letting investors claim deductions or losses that are more than any amounts they will have to pay. If we suspect fraud, we investigate the actions of the parties involved.
For more information on tax shelters and the general anti-avoidance rule, see Information Circular 89-4, Tax Shelter Reporting, and Information Circular 88-2, General Anti-Avoidance Rule – Section 245 of the Income Tax Act. You can get these information circulars at canada.ca/cra-forms or by calling 1-800-959-5525.