Professional Athlete Ends Up Destitute After Offshore Tax Scheme Is Discovered By CRA
Professional athletes may find themselves in a unique situation when it comes to paying taxes. They usually earn income in Canada and the United States that charge different jock tax rates. Tax planning and working with an audit insurance company is very important for athletes who earn a steady income throughout the year.
Donovan Bailey is a retired Jamaican-Canadian sprinter who legally broke the 10-second barrier in the 100 meters to hold an Olympic world record. Bailey gave $3.75 million to charity with the assurance that one day who he would get a chunk of the money. This is part of a tax plan that will protect the money he has earned from sponsorship fees and prizes.
The funds are shielded from taxes in an athletic trust but after his retirement, Bailey had to gradually close the trust to minimize CRA’s cut on his earnings. The donation that was made to charity will flow back through a complicated series of transactions before it becomes tax-free through an offshore trust.
However, the charitable donation plan was a way to escape paying taxes which the government found later on. The architect of the plan was Stuart Bollefer, a Bay Street tax lawyer who claims to have the ability to provide innovative resolutions to the tax issues of his clients. The tax scheme was also promoted to other athletes that include a prominent Olympic athlete and a world champion skier.
The scheme allowed Bollefer’s clients to shuttle millions of dollars to offshore accounts using a colourful cast of characters. The Canadian government went after Bailey and Bollefer’s clients for unpaid taxes otherwise, they will face criminal prosecution. Bailey owed the Canadian government almost $2.3 million in taxes. Bailey was given the wrong advice in handling his money and he has to settle his tax debt.
The protection provided by audit insurance company prevents disputes from happening between accountants or lawyers and their clients. Fees associated to tax audits are paid promptly and the client avoids sleepless nights of stress and worries. Audit insurance covers previously logged returns including those that the accountant did not lodge or prepare.