A warning has been issued regarding investment schemes that promise tax write-offs by investing in real estate through limited partnerships.
The Canada Revenue Agency said Monday that promoters including some tax representatives and tax preparers are claiming that investors can get write-offs of more than double the amount they invest in real estate.
These schemes claim that the significant tax benefit is due to the expenses incurred during the first year of investment.
As an example, an investor investing $5,500 may be promised a tax write-off of $12,500 due to financial services, lease enhancement, and tenant improvement costs in the first year.
This, the CRA warns, is not the case.
The agency clarifies that, although limited liability partnerships offer some of the benefits that apply to partnerships and corporate entities, any write-offs are limited to the amount invested.
Investors who chose to participate in these tax schemes, along with those that promote them, can face serious consequences including fines or even jail.
The CRA is advising investors to seek professional advice before investing, especially where deals appear too good to be true.