11 July 2001 External T.I. 2001-0089325 - ECOLOGICAL GIFTS

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: In interests of facilitating a large proposed ecological gift, a senator has written to CCRA to advise of opinions which may be required including clarification that proposed property is capital property and agreement as to proportion of property that is ecologically sensitive.

Position: It is not required that donor obtain an ATR in order to qualify for donation tax credit. Rulings may not be available with respect to whether property is held on income or capital account or on questions of valuation, in any event.

Reasons: IC- 70R4.

Signed on July 11, 2001

XXXXXXXXXX

Dear Senator:

We are writing in response to your letter of June 6, 2001, to the Honourable David Anderson, a copy of which was sent to the Honourable Martin Cauchon, concerning XXXXXXXXXX intention to gift the XXXXXXXXXX as ecologically sensitive land. You indicate therein that you wish to facilitate all parties to this potential transaction and to this end, you have identified a number of steps that you feel will need to be accomplished in the process. One step to which you have referred is the need for the Canada Customs and Revenue Agency (CCRA) to rule on the nature of this property as capital property.

An advance income tax ruling is a written statement given by the CCRA Rulings Directorate to a taxpayer indicating how the CCRA will interpret and apply specific provisions of existing Canadian income tax law to a definite transaction or series of transactions that the taxpayer is contemplating. While a taxpayer planning to make a significant gift may wish to obtain an advance income tax ruling confirming the application of specific provisions of the Act if the application of those provisions is not clear, there is no general requirement that a ruling be obtained in order to claim the benefit of the charitable donation tax credit.

Moreover, there are certain circumstances under which an advance income tax ruling will not be provided. These circumstances are set out in paragraph 15 of CCRA Information Circular IC 70-6R4, "Advance Income Tax Rulings", a copy of which is attached. It may be noted that these circumstances include requests in which the major issue to be resolved is whether a transaction should be viewed as being on income account or capital account. This would generally be an interpretation of fact, rather than law, and therefore not appropriate subject matter for an advance tax ruling.

In limited circumstances, however, an advance income tax ruling may confirm the capital or income nature of a particular transaction where that character is clear, the facts are not at issue, that issue is corollary to the major issue to be resolved, and the major issue is an interpretation of the law upon which the CCRA can rule. While there is no provision in the Income Tax Act which definitively limits the distinction between transactions on income and capital account, certain criteria that may be relevant are set out in paragraph 3 of CCRA Interpretation Bulletin IT-218R, "Profit, capital gains and losses from the sale of real estate", a copy of which is attached.

In your letter, you have also identified a need to reach an "agreement on the appropriate allocations". By this, we assume you mean that it must be established what portion of the capital gain realized upon gifting the XXXXXXXXXX is attributable to ecologically sensitive property and what portion is not. Such issues, being questions of fact, would not be addressed in the context of an advance income tax ruling. Instead, a taxpayer would generally be entitled to any allocation that he or she could establish is reasonable under the circumstances.

We thank you for having copied the CCRA with your correspondence in this regard and trust that this information will prove helpful to XXXXXXXXXX.

Yours sincerely,

Roy Shultis
Deputy Assistant Commissioner
Income Tax Rulings Directorate
Policy and Legislation Branch

Enclosures

c.c. Mr. David Anderson

Minister of the Environment