5 December 1996 External T.I. 9633935 - Who is Donor & FMV

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:

1.Whether official charitable donation receipt to be issued to corporation or shareholders?

2.Whether amount of gift s\b FMV of annuity contract or amount of annual annuity payment.

Position:

1.Corporation.

2.FMV of annuity contract on date gift is made.

Reasons:

1.Corporation was the owner of the gifted property at all times before gift was made.

2.Property gifted was the annuity contract and not the annual annuity payments.

									963393
XXXXXXXXXX							Wm. P. Guglich

December 5, 1996

Dear XXXXXXXXXX:

Re: XXXXXXXXXX

This is in reply to your request dated October 15, 1996 wherein you requested our views concerning a donation to the Foundation. We have been provided with a copy of your letter dated June 12, 1996 and the various documents you submitted to our Charities Division.

Our understanding of the situation is as follows:

?An individual assigned a life insurance policy to the Foundation. The annual premiums are $XXXXXXXXXX The cash surrender value of this policy prior to XXXXXXXXXX is $XXXXXXXXXX The beneficiary under the policy is the Foundation.

?A holding company purchased a single premuim Life Annuity with zero years guarantee and the individual was listed as the annuitant. Annual annuity payments in the amount of $XXXXXXXXXX are to commence on XXXXXXXXXX.

?The annuity contract was assigned to the Foundation. The annuity payments effectively fund the life insurance premiums.

The individual has requested that the official charitable donation receipt be issued to the different members of his family who are shareholders of the holding company.

You also requested our views as to whether the official receipt should show the fair market value of the annuity contract or the amount of the annual annuity payment.

OUR VIEWS

The official charitable donation receipt must be issued to the person that makes the gift. In order for a person to make a gift, the person must beneficially own the property. In the present situation, the assignment of the annuity contract to the Foundation could be considered a gift. The documentation submitted indicates that the holding company issued a cheque, dated XXXXXXXXXX, in the amount of $XXXXXXXXXX to purchase the annuity contract. The annuity contract was assigned on the same day to the Foundation. There is no indication in the documentation submitted that the shareholders of the holding company acquired a beneficial interest in the annuity contract prior to the assignment. As the documentation indicates that the holding company was the beneficial owner of the annuity contract, the donation cannot be considered to have been made by the shareholders. Accordingly, the official charitable donation receipt cannot be issued to the shareholders.

The documentation indicates that the property assigned to the Foundation was the annuity contract and not the annual annuity payments. Therefore, the amount entered on the official charitable donation receipt would be the fair market value of the annuity contract on the date the gift is made.

We trust our comments will be of assistance to you.

Yours truly,

R. Albert
for Director
Business and Publications Division
Income Tax Rulings and
Interpretations Directorate
Policy and Legislation Branch

c.c. Amy Crober

Charities Division