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.
Principal Issues: 1. How should a gift in kind be valued?
2. Are charitable donation deductions transferable from a subsidiary to it's parent?
Position: 1. Unable to comment. Referred to Valuations.
2. No
Reasons: 1. N/A
2. The legislation.
XXXXXXXXXX 2004-010131
November 29, 2004
Dear XXXXXXXXXX:
Re: Charitable Donation Tax Credit
This is in reply to your letter of November 2, 2004, and telephone conversation of November 1, 2004 regarding the charitable donation tax credit and in particular the valuation of property that will be subject to donation. We understand that your questions pertain to a particular factual situation, involving a specific taxpayer. 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. The Information Circular provides information on the types of situations upon which we can and cannot rule. As was discussed in your telephone conversation with Alison Campbell, we are not able to provide advance tax rulings when the matter involved is the determination of fair market value of property. However, we are prepared to offer the following general comments which may be of assistance.
Provided the organization that receives the donated property is a "qualified donee" as that term is defined in subsection 149.1(1) of the Income Tax Act, the organization would be entitled to issue a receipt that the corporate donor could use to support a claim for a charitable donation deduction under subsection 110.1(2) of the Income Tax Act. Provided there is no "amount of advantage" within the meaning of proposed subsection 248(30)of the Income Tax Act, the donation receipt issued by the qualified donee would be an amount equal to the fair market value of the donated property at the time that it is donated. Whether or not there is an advantage in respect of a donation is a question of fact. For example, if the donation is a condition of obtaining a contract, the donor would likely be viewed as receiving an advantage.
A corporate taxpayer may claim a charitable donation deduction in computing its income pursuant to section 110.1 of the Income Tax Act. The amount of the tax credit or deduction that may be claimed, will be based upon the "eligible amount" of the donation (the fair market value of the donated property less the fair market value of any advantage in respect of the donation). A deduction for a charitable donation may only be taken by the corporation making the gift and is not transferable to another taxpayer.
It is our understanding from speaking with valuators within the Canada Revenue Agency, that in assessing the reasonability of fair market valuations used by taxpayers, it is the quality of the appraisal(s) relied upon by the taxpayer that is considered. Where a taxpayer obtains three appraisals it should not be assumed that adopting the middle value would be considered proof of the reasonability of the fair market value of the donated property. For further guidance on what factors may be considered relevant to the Canada Revenue Agency in assessing the reasonableness of a fair market value appraisal to be relied upon by a taxpayer, you may wish to submit, in writing, the particular details of your factual situation and your valuation concerns to:
Mr. Yvon Lamontagne
Interim Manager
Valuations Section
Technical Applications & Valuations Division
Compliance Programs Branch
Canada Revenue Agency
13th Floor, Tower B
Place de Ville
112 Kent Street
Ottawa ON K1A 0L5
While the above comments are not binding on the Canada Revenue Agency, we hope that they will be of assistance to you.
Yours truly,
F. Lee Workman
Section Manager
Financial Institutions Section
Financial Industries Division
Income Tax Rulings Directorate
Policy and Planning Branch
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, 2004
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, 2004
Email this Content