8 March 2001 External T.I. 2000-0055825 - Gift by Will

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:

1. An individual, in his will, provides for a donation to be made to a private foundation to be established by the individual's estate. Would the donation qualify as a gift by will for the purposes of subsection 118.1(5)?

2. Where an individual's will stipulates that a specific amount is to be gifted to charity and provides a list of charities but the executor has discretion as to the allocation of funds to each named charity, would subsection 118.1(5) apply?

Position:

1. Yes, if the donation otherwise qualifies as a gift by will and the private foundation is a qualified donee at the time the gift is made.

2. Yes, if the executor acts reasonably and in accordance with the terms of the will and the donation is made to a charity that is a qualified donee.

Reasons: In our view, the wording of subsection 118.1(5) is broad enough to enable us to take this interpretation.

XXXXXXXXXX 2000-005582

March 8, 2001

Dear XXXXXXXXXX:

Re: Gift by Will - Subsection 118.1(5)

This is in reply to your letters dated March 10 and November 7, 2000 concerning the application of subsection 118.1(5) of the Income Tax Act (the "Act") to a situation where an individual dies and the individual, in his will, bequeathed a specific amount to a private foundation to be created by his estate.

You referred to the Agency's position that if the charity is not specified in the will, subsection 118.1(5) of the Act would not apply. Your question is whether a private foundation to be established pursuant to the terms of the will would be considered a charity which is specified in the will for the purposes of subsection 118.1(5) of the Act.

As discussed, this issue has been under review. Our review is now complete and we are of the view that the fact that the private foundation did not exist at the time of the individual's death will not, in and of itself, preclude the donation from otherwise qualifying as a gift by will as long as the private foundation is a qualified donee at the time the gift is actually made. Accordingly, where a specific gift is made in accordance with the terms of the individual's will to a private foundation established by the individual's estate that is a qualified donee at the time the gift is made, subsection 118.1(5) of the Act would generally apply to deem the gift to have been made by the individual immediately before the individual died for the purposes of section 118.1 of the Act.

Similarly, where the will stipulates that a specific amount is to be gifted to charity and provides a list of charities to which donations should be made but discretion is left to the executor to determine the amount to be given to each named charity, it is now our view that the donation would nevertheless qualify as a gift by will if the actions taken by the executor are reasonable and in accordance with the terms of the will and the donation is made to a charity that is a qualified donee.

In the situations described above, the completion of the gift should occur within a reasonable time period after the date of death. If the gift to the qualified donee is not completed until after the assessment of the deceased's final tax return, a request to adjust the tax return, subject to the time limitations in the Act for reassessments, should be sent to the appropriate tax centre along with the official tax receipt.

While we hope that our comments will be of assistance to you, they are given in accordance with the practice referred to in paragraph 22 of IC 70-6R4 and are not binding on the Agency in respect of any particular situation.

Yours truly,

Manager
Financial Institutions Team
Financial Industries Division
Income Tax Rulings Directorate
Policy and Legislation Branch