25 September 2008 Internal T.I. 2008-0274411I7 - Barter dollars: Charitable gifts

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 unit of barter dollars is an eligible property for the purpose of charitable gifts rule?

Position: Yes.

Reasons: The definition of "property" in subsection 248(1) is broad enough to include such a unit.

								September 25, 2008

Headquarters						Headquarters
Charities Directorate					Income Tax Rulings Directorate
								Guy Goulet CA, M.Fisc.

Attention:  Jane Waterfall
								2008-027441

Barter dollars

This is in reply to your email of March 10, 2008 in which you requested our comments regarding respect of a specific fact situation.

More specifically, you have described the situation where an individual is a member of a recognized barter club ("Club"), and he donates units of barter dollars ("Units") having a face value of $XXXXXXXXXX to a registered charity. The Units would have been acquired by the individual in return for services rendered or goods sold in the course of carrying on his business during a particular taxation year. Furthermore, it our understanding that the fair market value of the transaction that caused the reception of the Units would have been included in computing the individual's business income for the particular taxation year. The registered charity uses the Units to acquire goods necessary for its charitable activities from other Club members.

Unless otherwise stated, all statutory references are to the Income Tax Act ("Act").

According to the legislative proposals contained in Bill C-10 which received Second Reading in the Senate on December 4, 2007, the total charitable gifts in respect of an individual for a taxation year, means the total of all amounts each of which is the eligible amount of a gift made by the individual in the year or in any of the five preceding taxation years to a qualified donee. Proposed subsection 248 (31) provides among others that the eligible amount of a gift is the amount by which the fair market value of the property that is the subject of the gift exceeds the amount of the advantage, if any, in respect of the gift.

The definition of "property" in subsection 248(1) is very broad and includes a right of any kind whatever. We are of view that in the specific fact situation, the Units would constitute a "property" when they give the holder the right to acquire goods. Also, as long as the Units can be transferred to a third party, it is our view that they will be eligible property for the purpose of charitable gifts rule.

Furthermore, the determination of the fair market value of the Units is primarily a question of fact. Subject to the application of the proposed subsection 248(35), we are of the view that the registered charity could issue an official receipt for an amount equal to the fair market value of the Units received (less the advantage received in respect of the gift if any). When proposed subsection 248(35) applies, the fair market value of a property that is the subject of a gift is deemed, for determining the eligible amount of a gift, to be the lesser of the fair market value of the property and the cost of the property to the taxpayer. In the given fact situation, the determination of the cost of the Units for the individual is a question of fact. However, based on the rules set out in Interpretation Bulletin IT-490-Barter Transactions, it is our view that the cost of the Units to the individual could be equal to the total value of the goods, property or services given up in order to obtain the Units, plus or minus any cash paid or received as part of the barter.

We trust that our comments will be of assistance to you.

for Director
Financial Sector and Exempt Entities Division
Income Tax Rulings Directorate
Legislative Policy and Regulatory Affairs Branch