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 CRA will continue its administrative process with respect to gifts by will under the new provisions regarding gifts by GRE?
Position: General comments provided.
Reasons: The administrative process is under review.
CALU Roundtable - May 2018
Question 4 - Timing of donations from an estate
In Registered Charities Newsletter 27, the CRA stated that a registered charity is not permitted to issue a receipt prior to the transfer of property by a deceased taxpayer’s estate. Even so, the CRA stated that a donation tax credit can be claimed on the deceased taxpayer’s final return so long as the registered charity receives a letter from the estate advising of the gift and its value and the registered charity issues a letter to the estate acknowledging the gift and stating that it will accept the gift.
The CRA’s administrative practice was reiterated when asked how to claim a gift made by will if the gift is not received by the registered charity by the due date for filing the final return (e.g., 2010-0363131C6 -- 2010 STEP Conference Q13 – gifts by will and 2011-0430131E5 -- Subsection 118.1(5)—gift by will). The views were based on the understanding that an official donation receipt would be provided by the qualified donee when the property is received by the qualified donee. The 2017 T4011 Guide – Preparing Returns for Deceased Persons on page 18, still includes the above administrative practice.
For deaths that occur after 2015, if an estate arises as a consequence of the death of an individual, and there is a gift by will (by virtue of paragraph 118.1(4.1)(a)), paragraph 118.1(5)(b) deems the gift to be made by the estate at the time the property that is the subject of the gift is transferred to the donee and not at any other time. In addition, subsection 118.1(5.1) provides that the gift must be made by the estate no more than 60 months after the individual’s death either while it is a Graduated Rate Estate (GRE) or by a former GRE after the date of death if it continues to meet all of the requirements of a GRE except for the 36 month time limit. The donated property must be property that was acquired by the estate on and as a consequence of the death (or property that was substituted for such property).
Where subsection 118.1(5.1) applies to the gift by a GRE or former GRE, the donation can be allocated to the deceased individual or to the estate pursuant to clause (c)(i)(C) and subparagraph (c)(ii) respectively of the definition of total charitable gifts in subsection 118.1(1) (endnote 1).
More specifically, where subsection 118.1(5.1) applies to the gift, a donation tax credit can be claimed in any of the following tax returns:
- by the individual in any of:
(1) the tax return of the individual for the year of death; or
(2) the tax return of the individual for the year prior to the year of death;
(3) the tax return of the estate for the year the gift is made; or
(4) the tax return of the estate for a year prior to the year the gift is made if the estate is a GRE in that prior year.
An estate, whether it is a GRE or not, can claim a donation tax credit for a donation in the year in which the donation is made or in any of the five following years.
Can the CRA confirm that the above longstanding administrative practice will continue to apply to gifts made by an estate so that a donation tax credit can be claimed on the deceased individual’s final tax return at a time before the property is actually transferred to a qualified donee?
In certain circumstances the transfer of the gift cannot be completed within the 60-month period (for example, when there is outstanding estate litigation or when estate assets are complex), even though the property to be transferred or the amount of the gift may be known. In such circumstances, would the CRA’s administrative practice be available to allow a gift to be made beyond the 60-month period such that it would be considered to meet the conditions in subsection 118.1(5.1) with regards to the timing of the gift?
The CRA is currently reviewing the administrative practice with respect to the timing of donation claims with respect to the eligible amount of gifts made by GREs or former GREs and claimed on a deceased individual’s final T1 return. The issue will be considered in the upcoming review of guides and publications for the 2018 tax year. It is anticipated that more guidance will be available at that time.
Meanwhile, we can confirm that administrative relief, if any, will not extend to gifts of property transferred to qualified donees more than 60 months after the individual’s death since these gifts do not meet the conditions of subsection 118.1(5.1). Accordingly, such gifts cannot be claimed on the tax return of the individual for the year of death. Property that is subject of a gift that is transferred to the donee more than 60 months after the date of death can be claimed by the estate in the year the gift is made or in any of the five subsequent years. It is our view that a legislative amendment would be required to extend the period for which a gift can be made pursuant to subsection 118.1(5.1). A request for such an amendment would need to be made to the Department of Finance.
May 8, 2018
1 Similar provisions are contained in the definition of total cultural gifts and total ecological gifts in subsection 118.1(1).
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