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: Is the assignment by a graphic designer to a charitable organization of certain rights to a logo a gift?
Position: This is a question of fact.
Reasons: For example, it may be a contract for services
XXXXXXXXXX 1999-000698
March 29, 2000
Re: Charitable Donation Receipt
This is in reply to your September 26, 1999 letter wherein you requested that we consider the situation where a graphic designer is asked by a registered charitable organization to create a logo for it. You requested whether or not the charitable organization could issue a donation receipt to the graphic designer when the graphic designer assigns to the charitable organization her rights to the logo.
Your request appears to relate to either a proposed transaction or a completed transaction. Confirmation of the income tax consequences of proposed transactions involving specific taxpayers will only be provided in response to a request for an advance income tax ruling. To make such a request the advance income tax ruling must be submitted in accordance with the guidelines set out in Information Circular 70-6R3 (IC-70-6R3) dated December 30, 1996, issued by Canada Customs and Revenue Agency. However, if the situation relates to a completed transaction a request for the Agency's views must be made to your local Tax Services Office. Although we are not able to comment specifically on the situation described in your letter we can offer the following general comments.
Whether there is a gift of property as a consequence of an arrangement between a registered charitable organization and a graphic designer can only be made by reviewing the specific arrangement between the two parties and all the relevant facts. To the extent that the arrangement is a contract for services, no receipt for a donation could be issued by the registered charitable organization to the graphic designer. We refer you to our Interpretation Bulletin IT-110R3 which discusses gifts and official donation receipts and to comments in paragraph 15(d) dealing with contract of services.
Whether or not there would be rights separate and distinct from the services provided which can be assigned by the graphic designer to the charitable organization is a question of fact. If such rights exist and are property that the graphic designer retains for her own use the fair market value of the property at the time it is donated to the charity must be ascertained. While this is a question of fact it is not clear that the rights would have much value, if any, to a third party.
We would also like to note that when an artist creates a work of art with the intention of selling it, but instead makes a gift, the gift would be considered a disposition from the artist's inventory. In such a case we refer you to paragraph 14 of Interpretation Bulletin IT-504R2 which notes that when an individual who is an artist gifts a property from his or her inventory, pursuant to subparagraph 69(1)(b)(ii) of the Income Tax Act, the individual will be deemed to have received proceeds of disposition for the property equal to its fair market value such that an amount which is equal to that fair market value must be included in the individual's income.
The foregoing comments are intended as a general discussion only and, as noted above, the income tax consequences will depend on the facts of each particular situation which can only be determined on a case by case basis. Therefore while we hope that our comments are of assistance to you, this opinion is not a ruling and accordingly, it is not binding on Canada Customs Revenue Agency.
Yours truly,
F. Lee Workman
Section Manager
Financial Institutions Section
Financial Industries Division
Income Tax Rulings and
Interpretations Directorate
Policy and Legislation Branch
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