Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the CRA.
Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle de l'ARC.
Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the Department.
Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle du ministère.
Principal Issues: Can a charitable donation receipt be issued by a charity where rent is charged to a charity on the understanding that it be contributed back to the charity by the recipient?
Position: No.
Reasons: This is not a voluntary transfer of property and therefore not a gift.
XXXXXXXXXX 2000-006762
March 27, 2001
Dear XXXXXXXXXX:
Re: Charitable Donation
This is in reply to your letter dated January 30, 2001 wherein you requested our views on whether or not a charitable donation receipt could be issued by your association to a member of the Board of Directors of the Association where this member charges rent to the Association on the understanding that the member will contribute all or a portion of the rent back to the Association. The member of the Board of Directors represents one of your local chapters and the chapter office is located in the member's home.
The particular circumstances in your letter on which you have asked for our views appear to be a factual situation involving a specific taxpayer. As explained in Information Circular 70-6R4 dated January 29, 2001, it is not this Directorate's practice to comment on proposed transactions involving specific taxpayer other than in the form of an advance income tax ruling. Should your situation involve a specific taxpayer and a completed transaction, you should submit all relevant facts and documentation to the appropriate Tax Services Office for their views. However, we are prepared to offer the following general comments which may be of assistance.
A charitable donation made by an individual may only be eligible for a donation credit under subsection 118.1(3) of the Income Tax Act if such donation is considered to be a gift. Where a taxpayer charges rent to a charity on the understanding that the taxpayer will contribute the rent back to the charity we are of the view that this would not be a voluntary transfer of property by the taxpayer and therefore not a gift.
As indicated in our Technical News No 17 dated April 26, 1999, a copy of which is attached for your information, to constitute a gift, it is generally understood that there must be a voluntary transfer of property without consideration. It also states that there is nothing to prevent a charity from paying rent or interest on a loan of property and later accepting the return of all or a portion of the payment as a gift, provided it is returned voluntarily. There must be two separate transactions which are independent of each other. We also note that in such an arrangement the individual would have to report in his/her income for income tax purposes the rent charged to the charity. We are also enclosing a copy of our Interpretation Bulletin 110R3 for your information.
We trust that the above comments will be of assistance.
Yours truly,
F. Lee Workman
Manager
Financial Institutions Section
Financial Industries Division
Income Tax Rulings Directorate
Policy and Legislation Branch
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