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.
Principal Issues:
Whether a financial contribution is a gift
Position TAKEN:
General comments - not sufficient information
Reasons FOR POSITION TAKEN:
Question of fact
June 6, 1995
XXXXXXXXXX DISTRICT OFFICE HEADQUARTERS
Audit Services M. Shea-DesRosiers
(613) 957-8953
Attention: XXXXXXXXXX
7-950402
XXXXXXXXXX
Deductible Gifts and Donation Receipts
The Law
This is in reply to your Memorandum of February 7, 1995 concerning the above-mentioned subject and further to our telephone conversation of May 9, 1995. We apologize for the delay in replying to your Memorandum.
Whether or not a gift has been made for the purposes of the Income Tax Act (the "Act") is a question of fact to be resolved on the merits of each case. As stated in the Special Release of Interpretation Bulletin IT-110R2 at number 3, "A gift, for purposes of sections 110.6(1) and 118.1, is a voluntary transfer of property without valuable consideration". The taxpayer has the onus of proving that a gift was made and to that effect must, as a minimum requirement, establish that the conditions described in number 3 of IT-110R2 have been met. These conditions are:
(a) Some property - usually cash - is transferred by a donor to a registered charity.
(b) The transfer is voluntary. Any legal obligation on the payor would cause the transfer to lose its status as a gift.
(c) The transfer is made without expectation of return. No valuable consideration - no benefit of any kind - to the donor or to anyone designated by the donor may result from the payment.
The word "gift" is not defined in the Act. Generally the Courts have defined "gift" as a voluntary and gratuitous transfer of real or personal property for which there is a donor who freely disposes of his property and a donee who accepts the property given. No right, privilege, material benefit or advantage may accrue to the donor or to a person designated by the donor. In Aspinall v. M.N.R. 1970 D.T.C. 1669 at 1670 the Court held that "A gift must be voluntary and made with the intention that nothing will be received in return". A similar definition of "gift" is found in the Oxford Concise Dictionary "voluntary transference of property without compensation". (see also The Queen v. Burns 88 DTC 6101 at 6103-6105; The Queen v. McBurney 85 DTC 5433 at 5434-5436; The Queen v. Zandstra 1974 DTC 6416 at 6419)
As pointed out in number 11 of IT-110R2, the general rule that no benefit of any kind whatever may be made available to a donor does not, however, include items of little or no value given to a donor as a token of appreciation.
However, as mentioned at number of 12 of It-110R2, where a donor receives from a charity something of more than nominal value as an inducement for making a contribution, no official receipt may be issued. This is so even if the amount of the contribution exceeds the value of the inducement. Since the contributor has received consideration in return for his contribution, no gift has been made.
Whether the financial contribution is a "gift"
The fact that an Association, an individual or corporate member of said Association can be a member of the XXXXXXXXXX would not of itself make the financial contribution to the Fund by one of them not a gift for the purposes of the Act. What has to be determined is whether the particular Association or individual or corporate member which participates in the administration of the Fund as a member of its Board receives something in return. A donation of property to a registered charity is not a gift for the purposes of the Act if there is consideration of any kind being received in return.
The issue is therefore whether the corporation or individual member of the Association that sits on the Board can expect to receive something in return for the gift made or can influence the Board to the extent that their company or enterprise would receive something in return for making the gift, for example the granting of a governmental contract or in other words, can the corporate or individual member influence the Board to the point where they will be able to direct the money spent by the Fund to their own company or enterprise, or to a company or enterprise of their choice.
Where a registered charity solicits funds for a general charitable purpose and the donor expresses a desire that the gift be applied by the registered charity in a particular fashion, provided that the desired application is squarely within the purview of the responsibilities and functions normally carried out by the registered charity, in our opinion, such a donation would be considered a gift for purposes of the Act.
As mentioned above, it is for the individual or corporate member or the Association itself that makes the contribution to the Fund to show that a gift has really been made.
Taxpayer's Representation
In her Memorandum of January 31, 1995, XXXXXXXXXX mentions that the contributions to the Fund are made either by the Association or the individual or corporate members. For example, we find the following comments concerning each Association:
XXXXXXXXXX
XXXXXXXXXX
She concludes that
XXXXXXXXXX
Based on the above statement, it appears that the tax receipts would be issued to corporations. However it is not entirely clear from the facts given that all the members are individual corporations. XXXXXXXXXX refers to "individual members" (XXXXXXXXXX), "corporate members"(XXXXXXXXXX), "individual corporations" (XXXXXXXXXX). XXXXXXXXXX It has to be determined whether it is the particular Association or its members that make the gift or whether the particular Association acts as agent for its members? And why does the individual (if there are non-corporate members) or corporate member make their gift through their Association instead of directly to the Fund.
As you point out, a question arises as to why an Association, which is tax exempt, would want a tax receipt. The tax receipt would be useful to the individual or corporate members.
In the present situation, all the facts are not known and consequently there is not enough information to allow us to give a more elaborate opinion. We trust however that our comments will enable XXXXXXXXXX to determine whether a gift has been made and if so, to whom a tax receipt can be issued. Our Department will then have to decide, based on all the facts presented, whether a gift has really been made.
We trust the above comments will be of assistance to you. Should you wish to discuss this matter further, you can contact M. Shea-DesRosiers at the above-mentioned number.
Chief
Financing, Leasing and Deferred
Income Plans Section
Financial Industries Division
Income Tax Rulings and
Interpretations Directorate
Policy and Legislation Branch
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