13 March 1992 Income Tax Severed Letter 9205825 - Donation of land to Indian band — 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.

Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the Department. Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle du ministère.

Subject: DONATION OF LAND TO INDIAN BAND-GIFTS Section(s): 81(1)(a), 118.1(1), 110(1)(a)(iv), 149(1)(c)]

March 13, 1992

XXX Business and General Division Glen Thornley (613) 957-2101 920582

XXX-Donation of Land to Indian Band

This is in reply to your Round Trip Memorandum of February 14, 1992 with enclosed XXX

We have noted the opinion of XXX , however, we are not in agreement that the gift of land to the Indian band is a gift to Her Majesty in Right of Canada. If the transfer of land had been made through the Department of Indian and Northern Affairs it is quite likely that it would have been considered a gift to Her Majesty for purposes of the definition of “total Crown Gifts” in subsection 118.1(1) of the Income Tax Act.

With respect to section 36 of the Indian Act (“Special Reserves”) referred to by XXX, in order for land given to Indians to be considered a “Reserve” for purposes of the Indian Act, it must have been set apart for the use and benefit of a band. This can only be done by an Order in Council, which is usually initiated by the Department of Indian and Northern Affairs. As this is not the case the 1990 claim for a “Crown gift” should be rejected.

It may still be possible for XXX to claim a charitable donation credit under paragraph (d) of the definition of “total charitable gifts” in subsection 118.1(1) of the Income Tax Act. The Department's position as set out in paragraph 11 of Interpretation Bulletin IT-62 is that band councils that have reached the advanced stage of development required by Section 83 of the Indian Act will be regarded as Canadian municipalities for purposes of subparagraph 110(1)(a)(iv) of the Income Tax Act (now paragraph 118.1(1)(d)). Although section 83 of the Indian Act was amended in 1988 deleting the reference to the advanced stage of development, a band council will continue to be regarded as a Canadian municipality for purposes of paragraph 118.1(1)(d) of the Income Tax Act if it previously would have qualified as having reached an advanced stage of development under section 83 of the Indian Act.

Although an Indian band council is not a “municipality” for purposes of the Income Tax Act, our present policy is to regard Indian band councils as municipalities for the purposes of paragraph 149(1)(c) of the Act (non-profit organizations) and for the purposes of both paragraph 118.1(1)(d) and subparagraph 110.1(1)(a)(iv) of the Act where they exercise or have exercised the powers authorized under both section 81 and 83 of the Indian Act. Whether or not a band council has exercised these powers is a question of fact. If this is the case with respect to the XXX , the council may issue receipts for gifts received by it in the year.

Notwithstanding the foregoing, it would appear that XXX has a valuation problem with respect to his “gift”. Even if the band council is regarded as a municipality for purposes of paragraph 118.1(1)(d), XXX will have to have his gift valued at fair market value taking into consideration his retained “life interest” covenant and the other covenants set out in the Trust Agreement.

Please find attached XXX T1 Return and your other documents.

E. Wheeler
for Director
Business and General Division
Rulings Directorate
Legislative and Intergovernmental
Affairs Branch