Principal Issues:
Whether a donation constitutes a gift for income tax purposes when the donation is subject to various conditions.
Where a subsidiary, its parent, the controlling shareholder of the parent, and two charities enter into an agreement with respect to a donation, will subsection 15(1) apply to include the amount of the donation made by the subsidiary in the income of its parent or the controlling shareholder of the parent?
Whether the amount of the advantage in respect of the naming rights granted to the controlling shareholder is nil for the purposes of draft subsection 248(31)?
Position:
Based on the facts, it is our view that the donation would constitute a gift for income tax purposes.
Not in this case. The terms of the agreement provide that the subsidiary will make the gift.
Factual determination. In this case, the department, scholarships, chairs, etc. will be named after the shareholder or by the shareholder. Provided that there is no prospective economic benefit associated with the naming rights, it is our opinion that the amount of the advantage would be nil.
Reasons:
In previous files, we concluded that the fact that there are conditions attached to a gift similar to those present in this case does not, in itself, negate the gift.
The subsidiary, its parent, the controlling shareholder of the parent and the charities are all parties to the agreement.
In a previous ruling, we consulted with the Valuations Section on this issue and were advised that in order to have value, there must be a prospective economic benefit associated with the naming rights.