CRA finds that incurring indebtedness in order to make donations is grounds from revocation of private foundation status

S. 149.1(4)(d) authorizes the Minister to revoke the registration of a private foundation that has “incurred debts” subject to specified exclusions including “debts incurred in the course of administering charitable activities.” In finding that indebtedness incurred by a private foundation to make payments to qualified donees did not come within this exclusion, CRA stated:

[T[he making of gifts by a foundation in the course of charitable activities carried on by it, and the making of gifts to qualified donees are two activities that are mutually exclusive. As such … it is not possible for a foundation to make a gift to a qualified donee in the course of carrying on of its own charitable activities.

Neal Armstrong. Summary of 8 May 2009 Internal T.I. 2009-0309401I7 under s. 149.1(4)(d).