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: Donation of investment fund units to a charity
Position: question of fair market value of donation
Reasons: see letter
December 16, 1998
MEMORANDUM FOR NEIL BARCLAY
SUBJECT: Donation of Units of Investment Funds to Charities
You have asked if your advice to registered charities concerning the above type of donation should include a statement saying if there is a concern the donor should apply for an advance income tax ruling. In our view the answer is no since the issue seems to be the valuation of the units donated.
We have seen a valuation report for one fund and although we are not valuators, it seems to us that the projected revenue stream on which the report is based far exceeds a reasonable expectation. This is especially so considering the cash available to earn the investment income. If these types of income returns were possible, there would be no donation of the units to charities. As well, our valuation services did say that without a thorough analysis of the investment proposal, we could not accept the value arrived at.
Not only do we agree that it would be prudent to alert registered charities to be careful when issuing receipts for these types of donations, you might also add that based on what we have seen so far they can expect this department to challenge the valuations.
Once you have completed the draft of your newsletter, we will be please to provide you with our immediate feedback.
C. B. Darling
Director
Financial Industries Division
Income Tax Rulings and
Interpretations Directorate
Policy & Legislation Branch
