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: What are the income tax ramifications, if any, of a charity returning to a donor's estate property that it received pursuant to the donor's will?
Position: The tax implications depend upon the factual circumstances, including whether or not a gift was completed before the property is returned to the donor.
Reasons: If a gift was not completed and the property is returned to the donor, the Canada Revenue Agency (CRA) would be entitled to reassess any claim for a donation deduction or credit that was made in respect of the donation. If a gift was completed, the CRA would not reassess the donor's claim for a tax credit or deduction in respect of the donation. Where an amount refunded to a donor is limited to the amount donated, and the sole basis for the refund is that the charity cannot satisfy the charitable purposes for which the donation was made, the amount refunded generally would not constitute income to the donor at the time of the refund. However, the relevance of different or additional facts must be considered on a case-by-case basis.
January 16, 2004
XXXXXXXXXX TSO HEADQUARTERS
Financial Industries Division
Attention XXXXXXXXXX R. Maley
(613) 57-9226
2003-005176
Return of Gift by Will to Estate of Donor
This is in reply to your fax of November 17, 2003 attaching a copy of a letter dated October 29, 2003 ("the letter") to your attention. You have asked that we provide comments to enable you to respond to the letter, which asks what are the income tax ramifications, if any, of a charity returning to a donor's estate property that it had received pursuant to the donor's will.
As we understand, the charity at issue received, pursuant to a will, a sum of money to be used for a specific purpose which was stipulated in the will. The circumstances are such that the charity cannot use the money for the purpose stipulated and the estate has asked that the money be returned. The charity has asked its legal department to take such steps as necessary to determine whether the funds may or must be returned to the estate. Thus, it is not at this time clear that the money will be returned, in whole or in part.
The particular situation outlined in your letter relates to a factual one involving a specific taxpayer. Unfortunately, we cannot provide specific confirmation of the tax implications of the requested refund in these circumstances as no refund has actually occurred, as yet. The implications of any future refund will depend upon all the factual circumstances including the legal basis, if any, for the return of the money. However, we are prepared to offer the following general comments which may be of assistance.
In general, where a special purpose donation is made to a charity, the charity cannot reasonably satisfy the conditions attached to the donation, and a court orders that the property be returned to the donor, the tax implications depend upon whether or not a gift was legally completed pursuant to the laws of the relevant jurisdiction before the property is returned to the donor. If a gift was not completed at the time the property is returned to the donor, the Canada Revenue Agency (CRA) would be entitled to reassess any claim for a donation deduction or credit that was made in respect of the special purpose donation. If a gift was completed, the CRA would not reassess the donor's claim for a tax credit or deduction in respect of the gift.
Where an amount refunded to a donor is limited to the amount donated, and the sole basis for the refund is that the charity cannot satisfy the charitable purposes for which the donation was made, the amount refunded generally would not constitute income to the donor at the time of the refund. The relevance of different or additional facts would, of course, have to be considered on a case-by-case basis.
For your information a copy of this memorandum will be severed using the Access to Information Act criteria and placed in the Canada Revenue Agency's electronic library. A severed copy will also be distributed to the commercial tax publishers for inclusion in their databases. The severing process will remove all material that is not subject to disclosure, including information that could disclose the identity of the taxpayer. Should your client request a copy of this memorandum, they can be provided with the electronic library version, or they may request a severed copy using the Privacy Act criteria, which does not remove client identity. Requests for this latter version should be made by you to Mrs. Jackie Page at (810) 994-2898. A copy will be sent to you for delivery to the client.
F. Lee Workman
Manager
Financial Institutions
Financial Industries Division
Income Tax Rulings Directorate
Policy and Legislation Branch
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