15 February 1990 Administrative Letter 59456 F - Gift of Capital Property

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.

February 15, 1990

Dear Sirs:

Re:  Subsection 118.1(6) of the Income Tax act (the "Act")

This is in reply to your letter of January 24, 1990, and further to our letter of January 18, 1990, regarding the above-noted subject.

You have asked for further clarification that the executors of the deceased taxpayer's estate should, in the following situation, be able to make use of the provisions of subsection 118.1(6) of the act on behalf of the deceased taxpayer as the gifts of capital property should be considered to have been made by the taxpayer's will or otherwise for the purposes of subsection 118.1(6)of the Act.

A testator bequeaths a dollar amount legacy to a registered charity, as defined in the Act, and the residue of the testator's property equally to each of certain other registered charities as defined in the Act.  The will allows the executors of the testator's estate to distribute capital property of the estate in specie in satisfaction of the gifts to the registered charities. The fair market value of each property which may be distributed to these above-mentioned charities will exceed its adjusted cost base to the testator at the time of the distribution from the estate.  The property sought to be distributed does not constitute depreciable property of a prescribed class as defined in the Act. Further, the executors of the testator's estate must distribute either the capital property in specie to these certain registered charities or sell the property constituting the residue of the testator's estate and distribute the proceeds equally to these certain registered charities such that no other beneficiary of the estate may receive any of the capital property in specie or otherwise.

We would comment at the outset that it appears you have an actual situation in mind and, accordingly, if it is a proposed transaction it should be the subject of an advance income tax ruling in accordance with IC 70-6R.  If it is a completed transaction, it should be dealt with by your local district taxation office which has the responsibility for determining the income tax consequences to specific taxpayers of completed transactions.  Nevertheless, although we are reluctant to express an opinion without having access to the actual governing documents, we are prepared to offer the following general comments which may not be applicable in every situation.

Based upon the limited information made available to us, it is our view that the executors of the deceased taxpayer's estate should be able to make use of the provisions of subsection 118.1(6) of the Act n behalf of the deceased taxpayer as the gifts of capital property should have been made by the taxpayer's will or otherwise for the purposes of subsection 118.1(6) of the Act.

We also advise that the above is an expression of opinion only and is not binding on the Department.

Yours truly,

for DirectorBusiness and General DivisionSpecialty Rulings DirectorateLegislative and Intergovernmental Affairs Branch