10 April 2001 External T.I. 2001-0065935 - CHARITABLE DONATION

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 or not a particular contribution is a charitable donation.

Position: It is likely that a benefit is provided to a dependant of the payor.

Reasons: The meaning of a gift.

XXXXXXXXXX 							2001 - 006593

April 10, 2001

Dear XXXXXXXXXX:

Re. Charitable Donations

This is in reply to your letter of January 9, 2001 wherein you requested our views as to whether or not an official receipt as defined in section 3500 of the Income Tax Regulations could be issued pursuant to sections 110.1 and 118.1 of the Income Tax Act. in the circumstances described in your letter.

The particular circumstances described in your letter appear to be a factual situation involving specific taxpayers. As explained in Information Circular 70-6R4 dated January 29, 2001, it is not this Directorate's practice to comment on proposed transactions involving specific taxpayers other than in the form of an income tax ruling. Should your situation involve specific taxpayers and completed transactions, you should submit all relevant facts and documentation to the appropriate Tax Services Office for their views. However, we can offer the following general comments which may be of assistance.

As you know, the Department's views concerning charitable gifts are outlined in Interpretation Bulletin IT-110R3. In order to qualify as a charitable donation, there must be a true gift at common law. In our view, a true gift is a voluntary transfer of real or personal property from a donor, who must freely dispose of his or her property, to a donee, who receives the property given. The transaction may not result directly or indirectly in a right, privilege, benefit or advantage to the donor or to a person designated by the donor. To qualify, the donation must be in the form of an outright gift. Any legal obligation on the payor would cause the transfer to lose its status as a gift. Further, in order for an expenditure to be considered a gift, it must be made without conditions, from detached and disinterested generosity, out of affection, respect, or charity or like impulses, and not from the constraining forces of any moral or legal duty. The donee must have an unfettered right to use a donation as they wish.

Generally, the payment of an amount for participation in an event or a program such as a choir, whether on behalf of the payor, a dependant of the payor, or someone designated by the payor, does not qualify as a charitable donation regardless of whether or not the payment was voluntary and the use by the organization of the funds is unfettered. If in return for the payment, whether the payment takes the form of a membership fee or donation pledge, individuals receive benefits such as voice training and participation in concert performances, the payment would not constitute a gift for the purposes of sections 110.1 and 118.1 of the Income Tax Act. Further, it cannot be said that a donation is truly voluntary when the alternative to the donation is the requirement to pay a membership fee.

We hope that our comments will be of assistance.

Yours truly,

F. Lee Workman
Manager
Financial Institutions Section
Financial Industries Division
Income Tax Rulings Directorate
Policy and Legislation Branch