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: Whether a charitable donation of artwork to an art gallery qualifies as a "gift by the individual's will" as referred to in subsection 118.1(5) of the Income Tax Act. The terms of the will indicate that "the pieces of art to be donated will be those pieces of the art collection of the testator remaining after the spouse of the testator has selected, within one year of the demise of the testator, such of the pieces of art as she wishes."
Position: Subject to a review of all of the terms and conditions of the will, once the spouse has selected the pieces of art she wishes to have, the gift of the remaining pieces qualifies as a "gift by the individual's will" as referred to in subsection 118.1(5).
Reasons: The position is based on the interpretation of the words "gift by the individual's will" in subsection 118.1(5) and previous positions on a gift of residue in accordance with the terms of the testator's will. In accordance with the terms of the will, once the spouse makes her selection she releases any right to the remaining property which must be transferred pursuant to the terms of the will to the gallery. The executor does not have any discretion on whether the paintings will be donated. Therefore, the gift of the pieces of art is made pursuant to the testator's intention in accordance with the "individual's will" as referred to in subsection 118.1(5).
2005-013961
XXXXXXXXXX Manjula Vethanayagam
(613) 957-9226
November 25, 2005
Dear XXXXXXXXXX:
Re: Gift of Art by Will
We are writing in response to your letter dated June 28, 2005, with regard to the application of subsection 118.1(5) of the Income Tax Act to a situation where a testator's will provides for a charitable donation of pieces of art owned by the testator at the time of his death to an art gallery. According to the will, the pieces of art to be donated will be those pieces of the art collection remaining after the spouse of the testator has selected, within one year of the death of the testator, such pieces as she wishes to select. The will also stipulates that title to the pieces of art will be transferred to the charity within 36 months of the testator's death.
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. As we have not reviewed the specific terms of the will, we will offer the following general comments on the interpretation of subsection 118.1(5).
While it is necessary in any particular case to consider all of the terms of a will, it is our general opinion that where the executors have no entitlement to encroach on the capital of the estate the property required to be donated to the charity in the circumstances described above would qualify as a gift by the individual's will for purposes of subsection 118.1(5).
While we hope that our comments will be of assistance to you, the comments referred to above are not binding on the Canada Revenue Agency.
Yours truly,
F. Lee Workman
Section Manager
Charitable and Financial Institution Sectors
Financial Sector and Exempt Entities Division
Income Tax Rulings Directorate
Policy and Legislation Branch
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