Conservative Leader Andrew Scheer has an ownership stake in three real estate limited partnerships, an investment vehicle open only to the wealthy and favoured for its tax-sheltering advantages.

Real estate limited partnerships (RELPs) allow investors to write off up to 50 per cent of their initial investment, a more generous tax-planning measure than RRSPs or a pension plan. And income earned on the investment can later be treated as a capital gain, drawing a much lower tax burden than regular income.

In most provinces, an individual investor must be "accredited" and is required to have more than $1 million in "investable net worth," or an average income of $200,000 or more, to be considered for a limited partnership, putting this sort of arrangement out of reach for most Canadians.

Scheer's office told CBC News on Tuesday that in Saskatchewan, where Scheer resides, the leader qualified as an "eligible investor," meaning he had to show only $75,000 in personal income and a net worth of $400,000 or more to partake in these limited partnerships.

The leader invested $75,000 in the RELPs, and his holdings were known to Mary Dawson, the ethics commissioner.

Investment was disclosed

"Unlike Justin Trudeau's Liberals, this information is public because Mr. Scheer proactively disclosed it. [Finance Minister Bill Morneau] held his Morneau Shepell shares in a numbered company and he failed to disclose his private offshore corporation," Jake Enwright said.

Markland

A shopping plaza in Edmonton, owned by Markland Properties Ltd., a company which Scheer partially owns as a limited partner. (KAJEN Consulting)

Scheer has criticized Morneau for "protecting wealthy millionaires and those trying to hide it" by proposing changes to the small business tax regime. The Conservative leader has since personalized his attacks after it was revealed the minister sheltered some of his investments in holding companies and did not place his equities in a blind trust.

"The minister has travelled the country for months calling pizza shop owners and farmers tax cheats, accusing all kinds of hard-working Canadians of trying to avoid paying their fair share. The whole time, it was he himself who was avoiding paying his fair share," Scheer said in question period on Oct. 17.

The next day, Scheer said if Trudeau "truly wanted to find a wealthy Canadian who was using the system to avoid paying higher taxes, all he had to do was turn slightly to the right."

Scheer publicly reported his "nominal interest" in Cormack Properties Limited Partnership, Dorrill Properties Limited Partnership, and Markland Properties Limited Partnership in his conflict-of-interest disclosure filings. He entered into those partnerships, which are all perfectly legal, in 2006, 2010 and 2013 respectively, all before he became leader of the opposition.

But word of his holdings has at least one Liberal MP crying hypocrisy.

'Height of hypocrisy'

Liberal MP Raj Grewal, a former corporate lawyer, said it's a "bit rich" for Scheer to target Morneau when he's parked money in a niche investment vehicle designed to offer significant tax relief.

Raj Grewal

Liberal MP Raj Grewal said it's hypocritical of Scheer to accuse Morneau of not paying his fair share in taxes when Scheer is using a tax-advantaged investment vehicle like a real estate limited partnership. (Raj Grewal/Twitter)

"As the old saying goes, don't throw stones when you live in a glass house," Grewal said in an interview with CBC News.

"It is the height of hypocrisy, and irony, in my humble opinion, that they get up in the House everyday knowing that Mr. Scheer holds investments that are designed to take advantage of the tax system. He's making investments to defer taxes and that's exactly the accusation he's making in the House against Minister Morneau."

'Super lucrative'

Grewal, who worked on Bay Street before making the leap to federal politics and advised clients on the creation of RELPs, said these investments are widely known in financial circles as "RRSPs for rich people."

"It's actually super lucrative — you're deferring the taxes over the life of the mortgage, while getting a 50 per cent tax break," said Grewal.

"Justin Trudeau introduced tax hikes that do not affect his own self-proclaimed 'family fortune.' The Liberals are the true high tax hypocrites who are failing to be upfront with Canadians," Enwright said in response to Grewal's assertions.

Dorrill Properties

A warehouse and office building owned by Dorrill Properties Ltd., a company partially owned by Scheer, as a limited partner. (KAJEN Consulting)

A real estate limited partnership is essentially a cooperative of investors who pool their money together to purchase a property and lessen individual liability.

As a limited partner, Scheer put up capital to purchase stakes in three Alberta commercial properties, but is not active in the day-to-day management of the holdings. The agreements were administered by Saskatoon-based KAJEN Consulting, a firm that bills itself as specializing in "tax-advantaged investment real estate."

'A bit of a tax play'

In addition to the initial writeoff, RELPs typically offer other tax perks, according to Jason Heath, a fee-only financial planner with Objective Financial Partners, who has helped clients set up these sort of investments in the past. Heath has not advised Scheer, and is not privy to the details of his particular investments.

"This is usually a bit of a tax play. You get tax deductions in the first year, which reduces your income and tax payable on your personal tax return, and then five years, 10 years later, when the property is sold, it would be taxed as a capital gain, and a capital gain is only 50 per cent taxable," he said in an interview.

"You're getting tax deductions on 100 per cent of your initial investment while you're getting income paid back to you only taxable at 50 per cent," Heath said.

Cormack

A retail strip mall in Edmonton, Alta., owned by Cormack Properties Ltd. (KAJEN Consulting)

Millennium III, a similar firm with ties to KAJEN, advertises these limited partnership units as tools that could offer opportunities for income splitting.

"A high income earning individual can take advantage of tax writeoffs in the early years of the project and then, at the appropriate time, transfer the unit to a spouse, partner, or child in a lower tax bracket who can receive the income," the company advises on its website.

Corrections

  • A previous story implied Andrew Scheer had to have a minimum annual income of $200,000, or a net worth of $1 million, to participate in these RELPs. In fact, Scheer qualified as an "eligible investor" in Saskatchewan, meaning he had to show $75,000 in personal annual income and a net worth of $400,000.
    Oct 31, 2017 1:41 PM ET