15 November 1990 External T.I. 902780 F - Charitable Donations

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.

19(1)

November 15, 1990

19(1)

Re:  Charitable Donations Sections 110.1 and 118.1 of the Income Tax Act (the "Act")

We are writing in response to your letter dated October 3, 1990 requesting confirmation of a telephone conversation you had with Mr. Day of our office concerning the subject of charitable donations.

The facts of the situation you have presented follow.

Your client, registered charity operating as a charitable organization, is planning to solicit donations to capitalize an endowment fund and to create an annual award to be given to a member of the public in recognition of his or her significant contribution to the arts. Each award winner will receive a limited edition art print for his or her personal use and enjoyment. In addition, the award winner will either (i) be entitled to name a registered arts charity of his or her choice as the recipient of the income from the endowment fund for that year, or (ii) be given the income from the endowment fund for that year on the condition or understanding that this income will then be donated to a registered arts charity of his or her choice. Your question related to the latter method of providing the monetary portion of the award. The conclusion reached with respect to this method of award was that the award winner should be permitted to claim a charitable donation tax credit in the circumstances presented by scenario (ii) above.

Our Comments

As you are aware, paragraph 3 of Interpretation Bulletin IT-110R2 states the three conditions which must be present in order for a donation to be eligible for the credit against tax. Firstly "some property - usually cash is transferred by a donor to a registered charity". Secondly the transfer must be voluntary. There may or may not be a legal obligation upon the award winner to donate the award, however there would probably be a strong moral obligation to do so, such that the element of voluntariness necessary to a gift might be lacking. As a third precondition, the transfer must occur without consideration or benefit accruing to the donor or to anyone designated by the donor. A gift for tax purposes must be an outright gift with no conditions upon receipt; no right, privilege, material benefit or advantage may accrue to the donor or to a person designated by him. Whether or not the right to designate a specific arts charity of choice constitutes valuable consideration so as to disqualify the contribution as a gift for tax purposes is a question of fact.

In summary, where an awards winner accepts an award then voluntarily donates it to the arts charity of his/her choice, the guidelines set out in IT-110R2 would appear to be met. If however the awards recipient has no choice in the matter and is required to donate the award as a precondition to receipt, the guidelines will not have been met and no gift is considered made.

The amount of the monetary award would have no impact on the above comments.

We hope these comments are of assistance to you.

Yours truly,

for DirectorBusiness and General DivisionRulings DirectorateLegislative and Intergovernmental Affairs Branch

c.c.   Charities Division