How do you write a charitable receipt for an intangible?
This week the Rick Hanson foundation was reprimanded by the CRA for issuing a $1.8 million dollar charitable tax receipt to Rick Hanson for the rights to his name. They had an independent appraiser determine the worth of the rights to the name and believed they did everything above board. CRA determined that the rights to use the name constituted an “intangible”, and disallowed the transaction and ordered the foundation to recall the receipt.
Here’s how I think they could have successfully structured the transaction.
The foundation arranged for short term financing (less than 30 days) for the amount of the donation.
The foundation uses the leveraged funds to purchase the rights for the agreed amount.
Rick Hanson then returns donates the amount of the purchase back to the foundation.
The foundation uses the funds of the donation to repay the loan.
Obviously this would rely heavily on the first step of in this case securing a loan of $1.8 but this could have been arranged. Today’s market rates could have ensured this was done at a very modest cost. I’m sure the size of the donation would raise a red flag with CRA in any case but I think this way it would have to have been allowed.
I’d love to hear if anyone sees a flaw in my master plan.
K.
