18 July 2006 External T.I. 2006-0193261E5 - Reward points/airline ticket

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 the donation of an airline ticket that has been acquired by redeeming reward points qualifies as a gift for the purposes of section 118.1 of the Income Tax Act.

Position: Yes

Reasons: Where the reward points are redeemed to acquire an airline ticket that is immediately transferred to a registered charity, it is the fair market value of the airline ticket at the time it is transferred to the charity that is relevant to the determination of the donation tax credit.

XXXXXXXXXX
						2006-019326

July 18, 2006

Dear XXXXXXXXXX:

Re: Donation of an Airline Ticket

We are writing in response to your letter dated June 21, 2006 and further to our subsequent telephone conversation (XXXXXXXXXX/Leigh). You have requested confirmation that the donation of an airline ticket that has been acquired by redeeming reward points would qualify as a charitable gift.

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. However, we are prepared to provide the following general comments.

A gift for purposes of section 118.1 of the Income Tax Act (the "Act") involves, in addition to other conditions that must be satisfied, a transfer of property to a qualified donee. Where an individual redeems reward points under a program in which the individual is a member to acquire a particular item, and then voluntarily transfers it to a registered charity, the individual will be considered to have made a gift of that particular item rather than a gift of reward points. For the purposes of section 118.1 of the Act, the gift will be considered to have been made at the time the item is transferred to the charity and, subject to draft subsection 248(35) of the Act, it is the fair market value of the item at that time that is relevant in determining the eligible amount of the gift in computing the donation tax credit. In the case of an airline ticket, assuming it is immediately transferred to the charity upon redemption of the reward points, the fair market value of the airline ticket at the time of donation and the cost to the donor of the airline ticket should be the same. For more information on gifts in kind and the draft split-receipting rules, you may refer to our pamphlet P113, "Gifts and Income Tax," which is available on our website at www.cra-arc.gc.ca/forms.

We trust that these comments are of assistance.

Yours truly,

F. Lee Workman
Manager
Charitable and Financial Institution Sectors Section
Financial Sector and Exempt Entities Division
Income Tax Rulings Directorate