16 December 2008 External T.I. 2008-0268731E5 - Donation of Marketable Securities

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.

Principal Issues: Can the donation of marketable securities to a registered charity be characterized as enduring property? If so, would the charity be prevented from disposing of the marketable securities and maintaining the substitute property as enduring property?

Position: Marketable securities will qualify as enduring property. Provided the donor has given permission, the charity is not prevented from disposing of the securities and maintaining the proceeds as the enduring property.

Reasons: Enduring property is defined in subsection 149.1(1) of the ITA and includes a gift received subject to a trust or direction that it be held by the charity for a term of not less than 10 years. Property includes either cash or a gift-in-kind. Therefore, a gift of marketable securities, subject to the donor's written direction that they be held by the charity for 10 years, qualifies as enduring property.

The definition of enduring property includes "...the property given or property substituted for the gift..." Provided the donor has given the charity permission to dispose of the securities within the 10-year period, property later substituted for the original gift is considered part of the enduring gift.

XXXXXXXXXX 							2008-026873
A. Townsend
December 16, 2008

Dear XXXXXXXXXX :

Re: Donation of marketable securities qualifies as a 10-year gift

This is in reply to your letter of February 11, 2008 asking whether a donation of marketable securities can be characterized as enduring property and if so, would the charity be required to maintain the marketable securities in such form.

Enduring property is defined in subsection 149.1(1) of the ITA and includes a gift received by the registered charity that is subject to a trust or direction that the property given, or property substituted for the gift, is to be held for a period of not less than 10 years. This type of gift is also referred to as a 10-year gift.

In order to qualify as a 10-year gift, the donor must give written direction to the registered charity that the charity holds the property given, or property substituted for the gift, for a period of not less than 10 years. The written direction must be from the donor and not the charity. In addition, the direction must be given at the time the donation is made; it cannot be added at a later date. Below is an example of a donor's written direction found on page 8 of Guide RC4108, Registered Charities and the Income Tax Act:

Example

I hereby give *** to ABC Charity under the specific instruction that this gift or any property substituted therefore be held by ABC Charity for a period of (10 years or more).

	          (Signature of Donor)
		Name of Donor					Date

Property includes either cash or a gift-in-kind. Gifts-in-kind are gifts of property and they cover items such as artwork, equipment, securities, and cultural property. Therefore, a gift of marketable securities, subject to donor's written direction that they be held by the charity for 10 years, qualifies as a 10-year gift.

You have also asked whether the charity would have to keep the marketable securities in such form or could it dispose of same and maintain the proceeds as constituting the enduring gift. The definition of enduring property includes "...the property given or property substituted for the gift..." Provided the donor has given the charity permission to dispose of the securities within the 10-year period, property later substituted for the original gift is considered part of the enduring gift.

We trust these comments are helpful.

Lita Krantz
Assistant Director
for Director
Ontario Corporate Tax Division
Income Tax Rulings Directorate
Legislative Policy and Regulatory Affairs Branch