Principal Issues:
1) Can a taxpayer make a gift of publicly traded securities to a registered charity and request that the charity consider the total value of the securities to represent capital contributed for the purchase of a charitable gift annuity?
2) Can a registered charity accept any form of capital other than cash towards the purchase of a charitable gift annuity?
3) If a registered charity can accept publicly traded shares as payment for the charitable gift annuity, would the amount of the taxable capital gains be used to determine the value of the donation?
Position:
In the particular situation, there has not been a gift of the publicly traded shares. However, where a taxpayer uses publicly traded shares to purchase an annuity from a registered charity, we would consider that there has been a gift equal to the excess of the fair market value of the shares over the total amount of the annuity payments expected to be received by the donor, pursuant to IT-111R2. In a situation where a donor uses publicly traded shares to purchase an annuity from a registered charity, the donor cannot make an election under subsection 118.1(6), because technically there is no “gift”.
Reasons: