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 CCRA.
Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle de l'ADRC.
Principal Issues:
Cover memo to TSO for copy of interpretation provided to taxpayer on assessment issue. Asked to provide general comments on the operation of subsection 118.1(6) of the Act.
Position: General comments provided
Reasons: Legislation
March 31, 2003
XXXXXXXXXX TSO HEADQUARTERS
Verification and Enforcement Alison Campbell
(613) 957-3496
Attention: XXXXXXXXXX
2003-000437
XXXXXXXXXX
Cultural Property for Purposes of Subparagraph 39(1)(a)(i.1)
As was discussed between yourself and Alison Campbell of the Income Tax Rulings Directorate, we have attached to this memorandum, a copy of the reply letter we sent to XXXXXXXXXX had requested that we give him a ruling as to whether the CCRA would accept that he had made a gift of cultural property in XXXXXXXXXX, in respect of which there would be no taxable capital gain by virtue of paragraph 39(1)(a)(i.1) of the Act. As explained in the our letter to XXXXXXXXXX, we cannot provide "rulings" on completed transactions but we were able to provide him with some general comments that we hope will be of assistance to him.
It was mentioned to you by Alison Campbell, we would provide you with some information on a provision of the Act that could be used by a taxpayer to eliminate a capital gain on the disposition by way of a gift of capital property to a qualified donee. The provision is subsection 118.1(6) of the Act, which permits a taxpayer to designate an amount that is not less than the adjusted cost base of the property, and not more than the fair market value of the property. The amount so designated becomes the taxpayer's proceeds of disposition for purposes of computing any capital gain from the disposition of the property, and also becomes the fair market value of the gift that the taxpayer made to the qualified donee. If the taxpayer designates the amount under subsection 118.1(6) to be equal to the adjusted cost base of the property, then there will be no capital gain. The provision requires the designation to be made in the taxpayer's return of income for the year in which the gift was made to the qualified donee.
Should you have any questions regarding the above information or that provided to the taxpayer, please contact Alison Campbell at (613) 957-3496.
Thank you very much for your assistance.
F. Lee Workman
Manager
Financial Institutions Section
Income Tax Rulings Directorate
Policy and Legislation Branch
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