16 February 2001 External T.I. 2001-0067755 - Directed Donation not a Gift

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:

Can a donation receipt be issued to a donor where the donor has specified that the contributed funds are to be used to help a specific person who is known to them?

Position: No

Reasons:

Donation receipts can only be issued for gifts received by a registered charity. Where a donor specifies that the registered charity must use the funds received to benefit a particular person, the donor has not made a gift as the term is defined in the common law.

XXXXXXXXXX  		2001-006775
			Alison Campbell
February 16, 2001

Dear XXXXXXXXXX:

Re: Directed Contribution

We are writing in respect of your request dated January 17, 2001, for our comments on a particular donation transaction. Written confirmation of the tax implications inherent in particular transactions are given by this Directorate only where the transactions are proposed and are the subject of an advance income ruling request. Where the particular transactions are completed, the inquiry should be addressed to the relevant Tax Services Office. However, we are prepared to provide the following comments.

The situation you described is one where two individuals would contribute money to a benevolent fund of a Church, with the stipulation that the money go towards providing counseling for a member of their family who they believe is in need. You wish to know whether these individuals can be provided with a charitable donation receipt in respect of their contributions.

For a charitable donation tax receipt to be issued, the Church must have received a "gift" for the purposes of the Income Tax Act (the "Act"). A "gift" for purposes of the charitable donation tax credit rules in the Act, is generally considered to have been made where there is a voluntary transfer of property by a donor to a registered charity, without expectation by the donor that in return for the contribution, a benefit of any kind will be provided to the donor or a person designated by the donor. When a charity receives a "gift" it has discretion as to how the donated funds are spent. A donor may request that their donated funds be used for a particular program operated by the charity, and provided the charity maintains discretion as to how the funds are spent within the program, the donated funds would generally still be considered a gift received by the charity.

In the situation you describe, the Church would have no discretion with respect to how it would spend the contributed funds. The donors will also have designated a particular person, who is known to them, and for whose benefit the donated funds must be used. If the funds are used by the Church as directed by the donors, then not only will a person designated by the individuals have benefited as a consequence of the donation, but the donors themselves will also have indirectly received a benefit in return for their donation. Accordingly, contributions of this type would not in our view, be considered gifts received by the Church for which a charitable donation tax receipt could be issued.

We trust that this information will be of assistance to you.

Yours truly,

F. Lee Workman
Manager
Financial Institutions Section
Income Tax Rulings and
Interpretations Directorate