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The Canada Revenue Agency has shut down a pair of Toronto-based charities it believes collected nearly $200-million in tax-shelter schemes.

Earlier this month, the CRA revoked the charitable status of both the Funds for Canada Foundation, which it said yesterday collected $176.5-million between Dec. 2, 2005, and Dec. 31, 2006, and the Jesus El Buen Pastor Spanish Pentecostal Church of Toronto, which it said collected another $18.5-million during 2006 and 2007.

According to two letters written by the CRA to the Funds for Canada Foundation and obtained by The Globe and Mail, the agency said the operation was promoted as a tax shelter. Investors were told they'd get a $10,000 receipt for each $2,500 donation, the CRA alleges. The remaining $7,500 was to be provided by a "master trust."

For a $10,000 donation, $9,100 would be sent to Trafalgar Trading Limited as an "investment," the CRA letter alleges. TTL's website says the Bermuda group was founded in 1994 by Canadian Edward Furtak and includes a "charities program." The CRA said another $800 would be given to Parklane Financial Group, which has a website saying it is based in Burlington, Ont. The charity was left with $100, or 1 per cent, described by the CRA as "meagre."

The Funds for Canada Foundation paid a total of $14.2-million to promoters while sending another $160-million to an offshore account, the CRA alleged in a news release yesterday.

"The vast majority of the funds received by the Foundation are applied for the benefit of the promoters, to the detriment of the Charity's interests, with a proportionally insignificant amount being devoted to charitable activities," the letter says. "In our view, the Charity is primarily or collaterally operating for the purpose of supporting, promoting and participating in a tax shelter arrangement."

One investor had already launched a civil class-action lawsuit against both companies, Mr. Furtak, and many others, seeking $60-million in damages.

The Jesus El Buen charity, meanwhile, was alleged to have colleted $18.5-million in gifts and cash over two years. The charity said it handed out $15.8-million in goods, but the CRA said "the Charity's records fail to substantiate the property actually existed ..."

Of the remaining $2.7-million, only $56,000 was used for charitable activities, the CRA alleges.

"It is our position that the Charity has operated for the non-charitable purpose of promoting a tax-shelter arrangement and for the private benefit of the tax shelter promoters," the CRA alleged.

With a report from Stephanie Chambers

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