Lawyer found negligent for tax advice to ex-Olympic skier

Lawyer found negligent for tax advice to ex-Olympic skier | Insurance Business Canada

Lawyer found negligent for tax advice to ex-Olympic skier

The Winter Olympics may have ended, but one lawyer found himself buried under snow after being hit by a lawsuit from an ex-Olympic skier.

An Ontario Superior Court judge found Toronto lawyer Stuart Bollefer, and his law firm, negligent in tax advice they provided to retired Canadian Olympic skier Katherine Pace-Lindsay, Law Times reported.

Pace-Lindsay filed the lawsuit after the Canada Revenue Agency (CRA) audited her tax returns, finding that “the steps taken pursuant to the defendants’ advice relating to the donation amounted to a sham,” according to the decision.

Judge Bernadette Dietrich ruled that Bollefer and Aird & Berlis LLP failed to warn Pace-Lindsay about the risks of a plan they devised to limit the income tax she paid on assets she held in a trust.

“The defendants breached their duty to provide competent legal and tax advice,” the judge said in a statement.

“Mr. Bollefer breached his duty to apply reasonable care, skill and knowledge in the provision of his professional services to the plaintiff in accordance with the standards of a reasonably competent solicitor with particular expertise in income tax planning matters.”

Bollefer and his firm were brought in by Pace-Lindsay for advice regarding the wind up of a trust, one that had been designed to allow the athlete to maintain her amateur status and to defer income tax, a decision said.

Pace-Lindsay received cash from sports events and endorsements, which she put into the trust. Through this, she was able to accumulate about $1 million worth of assets, which included publicly traded securities and shares from private companies. The trust was set to wind up in 2006 – some eight years after she retired from skiing competitively.

Bollefer proposed that Pace-Lindsay make a donation of $750,000 from the trust to an offshore Canadian charity, while spending the remaining $250,000 on a life insurance policy. On paper, the plan would have allowed her to maintain the private company shares and reduce the amount of income tax she would pay on investments. The receipt from the donation would then be used to claim a deduction against her income from the trust and the amount paid to the charity would then be transferred to an offshore insurance company, which would purchase the life insurance policy.

The skier was assured by Bollefer and his firm that she would avoid tax on the pre-tax income held in the trust. Pace-Lindsay was also informed that she would be able to direct the investment of the donation through an offshore financier; upon the death of the insured parties, the cash would be returned to her.

The plan, however, never came off – the offshore charity Pace-Lindsay donated to was not a registered charity at the time of her donation. It was found that Bollefer was involved in the foundation of the charity, and had acted as the organization’s legal counsel at the time its registration was cancelled.

In court, Pace-Lindsay testified that she did not understand the plan, relying on Bollefer and his law firm’s advice. She also said that she never would have put her funds into the plan if it were not for the lawyer’s advice.

 
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