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: What is our view of the application of paragraph 8 of IT-226R.
Position: See below.
Reasons: See below.
IT 226R Paragraph 8 - Q&A
Question:
What does the Agency view as being the appropriate application of paragraph 8 of IT-226R to a gift of a residual interest in a property, other than real property, to a charity?
Answer:
Subsection 118.1(6) allows a taxpayer to elect at an amount not greater than the fair market value and not less than the adjusted cost base of capital property that is transferred to a qualified donee. In such a case, both the proceeds of disposition and the amount of the gift is considered to be the elected amount.
Where a taxpayer transfers capital property to a trust and a qualified donee is given a residual interest in the trust, an election under subsection 118.1(6) is not available because the transferred property is not being transferred to a qualified donee.
Notwithstanding the technical wording of subsection 118.1(6), in such circumstances IT-226R administratively allows a taxpayer to utilize subsection 118.1(6), subject to an important qualification which is described below.
Paragraph 8 of the IT provides that as a general rule the amount elected upon in respect of the property will be regarded as both the proceeds of disposition in respect of the property and the amount of the gift of the residual interest in the trust to the qualified donee. However, in situations where the elected amount is greater than the fair market value of the residual interest in the property, the elected amount will represent the taxpayer's proceeds of disposition for the purposes of determining any gain or loss on the transfer of the property to the trust, but the amount of the donation eligible for a tax credit will not be more than the fair market value of the residual interest. The Agency cannot administratively allow a donation tax credit based on an amount which exceeds the actual value of a gift received by the charity. As well, a qualified donee cannot issue a donation receipt for more than the fair market value of the property it receives.
The above comments are intended to clarify the Agency's position with respect to paragraph 8 of IT-226R which, as we have indicated previously, is presently under review.
January 17, 2000
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