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 CCRA.
Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle de l'ADRC.
Principal Issues:
We are asked to provide comments on the tax implications of purchasing a ticket to a fundraising dinner after December 20, 2002.
Position:
Provided general comments on the application of the draft gifting legislation in determining the eligible amount of a gift.
Reasons: Legislation and draft legislation.
XXXXXXXXXX 2003-000840
R. Maley
July 24, 2003
Dear XXXXXXXXXX:
Re: Canada Customs and Revenue Agency
Proposed Guidelines on Split Receipting
This is in reply to your letter of March 14, 2003 in which you requested our views on the tax implications where a person purchases a ticket to a fundraising dinner for a registered charity ("the charity") after December 20, 2002.
Specifically, you have asked us to consider an example where a person ("the donor") purchases a ticket for $150, the fair market value of the dinner is $50 and prizes having a fair market value of $7500 will be raffled at the fundraising event. In your example 225 tickets in total are sold and the proceeds of the dinner are given to a registered charity. Can the charity issue a donation receipt to the donor and if so, for what amount?
Written confirmation of the tax implications inherent in particular transactions is given by this Directorate only where the transactions are proposed and are the subject matter of an Advance Income Tax 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.
Interpretation Bulletin IT-110R3, "Gifts and Official Donation Receipts" discusses the tax benefits that may be available to a donor who makes a gift to charity. In general, a "gift" for purposes of the Income Tax Act ("the Act") means a voluntary transfer of property without valuable consideration to the donor. Proposed amendments to the Act will allow the Canada Customs and Revenue Agency (CCRA) to recognize a gift, for tax purposes, in certain circumstances where a donor has received consideration for property transferred to a registered charity or other qualifying donee after December 20, 2002.
Pursuant to draft subsection 248(30) of the Act, the eligible amount of a gift is the excess of the fair market value of the property transferred to a qualified donee over the amount of the advantage provided to a donor. Draft subsection 248(31) of the Act provides that the amount of the advantage is generally the total value of any property, service, compensation or other benefit received or obtained by the donor. Draft subsection 248(32) of the Act provides that the existence of an advantage in respect of a transfer of property will not, in and of itself, disqualify the transfer from being a gift, in circumstances where the amount of the advantage is not more than 80% of the fair market value of the property transferred.
The CCRA has issued Proposed Guidelines on Split-Receipting ("the Guidelines"), in Income Tax Technical News No. 26, to assist taxpayers in understanding how these amendments will apply in certain common gifting situations. The Guidelines note that, following a period of consultation, some CCRA bulletins and publications will need to be revised. In the interim, taxpayers are entitled to rely on the Guidelines for gifts made after December 20, 2002.
The Guidelines explain that any advantage received or obtained by a donor (or any person not dealing at arm's length to the donor) must be clearly identified and its value ascertainable, if a donation receipt is to be issued to the donor for the eligible amount of the gift. In your example, the meal is clearly an advantage to the donor who purchases the ticket.
The Guidelines also explain that the value of any "complimentary benefits" to the donor will be considered an advantage unless the aggregate value of such benefits, per ticket sold, does not exceed the lesser of 10% of the ticket price and $75 ("the de minimis rule"). A "complimentary benefit", in this regard, means any item that is provided, in addition to the object of the event, to all participants for attending the event and any door and achievements prizes that all attendees at the event are eligible to win or receive by virtue of attending.
In your example, the object of the event is the meal. The eligibility to win a raffle prize is a complimentary benefit. The aggregate value of the prizes, per ticket sold, is $33 (i.e., $7500/225). This exceeds the lesser of 10% of the ticket price ($15) and $75. Therefore, the de minimis rule does not apply and the eligibility to win a raffle prize is an advantage to the donor, the value of which must be considered in computing the eligible amount of the donor's gift.
The total value of the advantages received by the donor in your example would be $83 ($50 for the meal and $33 for complimentary benefits). As the donor purchased the ticket in order to benefit the charity and the value of advantages received by the donor is not more than 80% of the ticket price, the donor will be viewed as having made a gift to the charity. The eligible amount of the gift is $67 ($150 is paid for the ticket and $83 is received as advantages) and the charity may issue a receipt to the donor for this amount.
We trust that our comments will be of assistance to you. However, as stated in paragraph 22 of Information Circular 70-6R5, this opinion is not a ruling and consequently is not binding on the CCRA in respect of any particular situation.
Yours truly,
For/F. Lee Workman
Manager
Financial Institutions Section
Financial Industries Division
Income Tax Rulings Directorate
All rights reserved. Permission is granted to electronically copy and to print in hard copy for internal use only. No part of this information may be reproduced, modified, transmitted or redistributed in any form or by any means, electronic, mechanical, photocopying, recording or otherwise, or stored in a retrieval system for any purpose other than noted above (including sales), without prior written permission of Canada Revenue Agency, Ottawa, Ontario K1A 0L5
© Her Majesty the Queen in Right of Canada, 2003
Tous droits réservés. Il est permis de copier sous forme électronique ou d'imprimer pour un usage interne seulement. Toutefois, il est interdit de reproduire, de modifier, de transmettre ou de redistributer de l'information, sous quelque forme ou par quelque moyen que ce soit, de facon électronique, méchanique, photocopies ou autre, ou par stockage dans des systèmes d'extraction ou pour tout usage autre que ceux susmentionnés (incluant pour fin commerciale), sans l'autorisation écrite préalable de l'Agence du revenu du Canada, Ottawa, Ontario K1A 0L5.
© Sa Majesté la Reine du Chef du Canada, 2003
Email this Content