23 February 2000 External T.I. 2000-0007335 - CERTIFIGIFTS DONATIONS

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: Whether a person can make a gift and transfer the related credit/deduction to a retailer in exchange for a discount.

Position: No

Reasons: Retailer would not be transferring property to the charity - therefore no gift. Individual has not made a gift due to consideration received. In short charitable credits are not transferable under the Act.

XXXXXXXXXX 		2000-000733

February 23, 2000

Dear Sir:

Re: Certifigift - Charitable Tax Certificate Proposal

This is in reply to your letter dated December 17, 1999 to Mr. McCloskey, Assistant Commissioner, Policy and Legislation Branch and further to your telephone conversation of February 15, 2000 with Messieurs Brian Darling and Lee Workman of the Financial Industries Division of the Canada Customs and Revenue Agency.

Your proposed certifigift arrangement contemplates that a person would transfer an amount of money to an entity in exchange for a certifigift which would ultimately be used by the holder of the certifigift as partial consideration for the purchase of goods from a particular retailer. The entity would hold the funds received in exchange for certifigift until directed by the retailer, or a person to whom the retailer transferred the used certifigift, to transfer the funds to a registered charity. The issue for income tax purposes is whether the person who directed the entity to transfer the funds to the registered charity can be considered to have made a charitable donation to the registered charity.

A gift is a voluntary transfer of property by a person without valuable consideration. The amount of the gift is the fair market value of the property transferred. As we discussed it is our view that the person providing the direction to the entity to transfer funds to the registered charity would not be considered to have made a gift on the basis that he has not transferred any property that he owns to the registered charity. In other words the providing of a direction to transfer property not owned by the person making the direction is not the making of a gift of property by the person giving the direction. While it might be argued that person giving the direction is making a gift to the registered charity in the form of the used certifigift, it is our view that even if such argument could be sustained the property would not have any value. In this regard the value of the certifigift as a reduction in purchase price has been consumed. Any value it might have in terms of entitling the holder thereof to a tax credit or deduction would only exist if it carried an inherent right to a tax credit or deduction. This would not be the case as a tax credit or deduction which is available to the person making the gift does not arise until after a gift is made. As we discussed the portability of charitable tax credits or donations, which appears to be key to the certifigift proposal, is not provided for under the Income Tax Act. This would require an amendment to the Income Tax Act which is the responsibility of the Department of Finance.

We hope our comments are of assistance to you in clarifying our position with regard to your proposal.

Yours truly,

F. Lee Workman
Manager
Financial Institutions Section
Financial Industries Division
Income Tax Rulings Directorate