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:
1. Can a charity issue a receipt when a landlord allows the charity to occupy office space rent free?
2. Can a charity issue a receipt to a programmer who creates software for the charity in recognition of the programmer's time?
Position:
1. No.
2. Question of fact whether a property has been transferred. If so, then amount of receipt would be fair market value of property transferred.
Reasons:
1. A gift for tax purposes requires that there be a transfer of the donor's property to the charity. Granting the right to use the donor's property is not a gift.
2. Similarly, a donation of services is not a gift. If a property is transferred such that there is a gift, the amount of the receipt is the fair market value of the property at the time of the gift.
XXXXXXXXXX 2003-001859
December 3, 2003
Dear XXXXXXXXXX:
Re: Donation of Office Space and Software
This is in response to your letter of May 8, 2003 in which you ask whether a registered charity can issue a receipt in either of two types of situations. The first situation occurs where a person allows the charity to use office space but does not charge the charity rent. May the charity issue a receipt to the landlord in an amount equal to the rent that the landlord would have charged to a third person? The second situation occurs where a computer programmer, who is developing software, indicates that he would like to donate the software to the charity. May the charity issue a donation receipt for the total value of the programmer's time?
The particular situations outlined in your letter appear to relate to factual ones involving specific taxpayers. As explained in Information Circular 70-6R5, it is not this Directorate's practice to comment on proposed transactions involving specific taxpayers other than in the form of an Advance Income Tax Ruling. Should your situation involve a specific taxpayer and a completed transaction, you should submit all relevant facts and documentation to the appropriate Tax Services Office for their views. However, we are prepared to offer the following general comments which may be of assistance.
A gift for purposes of the Income Tax Act requires that there be a transfer of a donor's property. Where a transfer of property constitutes a gift for tax purposes, the charity is entitled, pursuant to paragraph 3501(1)(h) of the Income Tax Regulations, to issue an official receipt for income tax purposes to the donor in an amount equal to the fair market value of the property at the time of the gift.
A "transfer of property" in this respect means that the donor is divested of a property and the property vested in the registered charity. A transfer of property does not include a grant of a right to use the donor's property. Moreover, it does not include a donation of the donor's services. For example, see the CCRA Charities Directorate Policy Commentary CPC-017. It is available on the CCRA website at http://www.ccra-adrc.gc.ca/tax/charities/policy/cpc/cpc-017-e.html.
Thus, a charity may not issue a receipt for any amount to the donor in the first situation you have described. In the second situation, the charity may not issue a receipt in respect of the programmer's time. It is not clear to us, in the second situation, whether a gift would be made as it is not clear from the hypothetical facts whether a property would be transferred by the programmer to the charity. If a property is transferred that constitutes a gift for tax purposes, the charity may issue a receipt for the fair market value of the property that is transferred.
We trust that these comments will be helpful. 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,
F. Lee Workman
Manager
Financial Institutions
Financial Industries Division
Income Tax Rulings Directorate
Policy and Legislation Branch
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