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:
Whether, where property is transferred to a trust for the benefit of a charity, the trust acquires the property at its fair market value.
Position:
Trust acquires the property at its fair market value.
Reasons:
Subsection 69(1)(c) of the Act.
5-964143
XXXXXXXXXX C. Chouinard
Attention: XXXXXXXXXX
May 22, 1997
Dear Sir:
Re: Gift to a Charity of an Equitable Interest in a Trust
We are writing in response to your letter of December 9, 1996, wherein you requested our comments regarding a gift to a charity of an equitable interest in a trust.
In the situation you describe, property is transferred to a trust for purposes of donating an equitable interest in the trust to a charity. The fair market value of the property at the time of the transfer is $500,000, its adjusted cost base is $250,000, the present discounted value of the property is $50,000 and the present discounted value of its cost is $25,000. You inquire about the acquisition cost of the property to the trust.
Written confirmation of the tax implications inherent in particular transactions are given by this Directorate only where the transactions are proposed and are the subject matter of an advance ruling request submitted in the manner set out in Information Circular 70-6R2. The following comments are, therefore, of a general nature only, and are not binding on the Department.
It appears from your letter that you are of the view that the proceeds of disposition of property transferred to a trust for purposes of making a gift to a charity would be based on the present discounted value of the property, whereas the acquisition cost of the property to the trust would be based on current fair market value. In this respect, you should note that both the proceeds of disposition and the acquisition cost of the property would be based on current values. Present discounted values are only relevant as regards the amount of the gift, which, as indicated in paragraph 5 of IT-226R, must take into consideration the fair market value of the property, the current interest rates, the life expectancy of any life tenants and any other factors relevant to the specific case.
We trust that these comments will be of assistance.
Yours truly,
R. Albert
for Director
Business and Publications Division
Income Tax Rulings and
Interpretations Directorate
Policy and Legislation Branch
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