31 May 1995 Internal T.I. 9504917 - GIFT BY WILL

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:

1.Whether the deceased taxpayer can have a deduction pursuant to section 18.1 in respect of charitable under her will?

2.Whether a deduction would be available if the beneficiary of the estate makes an irrevocable autorization directing the executors to set aside a portion of the estate to guarantee the payment to residuary beneficiaries?

Position TAKEN:

1.No

2.No

Reasons FOR POSITION TAKEN:

1.The executor has a right to encroach on the capital of the estate. See paragraphs 2 and 6 of IT-226R.

2.The donation is not made pursuant to a will as required by 118.1(5).

			May 31, 1995

OTTAWA TAX SERVICES HEADQUARTERS
Robert Gagnon
Attention: M. McNamara (613) 957-8953
Client Assistance
7-950491

XXXXXXXXXX

We are writing in response to your memorandum of February 20, 1995, wherein you requested our comments concerning the application of section 118.1 of the Income Tax Act ("Act").

Facts

1.

2. XXXXXXXXXX

3.

4.The executors have requested a reassessment for deduction for carry back of unused charitable gifts in computing the tax payable of the deceased for the 1993 taxation year and have claimed a deduction for charitable gifts in the deceased tax return for the 1994 taxation years.

5.You have refused to reassess the 1993 taxation year in respect of the deduction for charitable gifts because the will permits encroachment on the capital.

6. XXXXXXXXXX

Our Opinion

It is the position of the Department that where an executor of an estate or a trustee (see paragraphs 2 and 6 of Interpretation Bulletin IT-226R) has a right to encroach on the capital of the estate or trust, no tax credit in respect of the donation is allowed because the size of the donation cannot reasonably be determined.

A deceased may have a tax credit for charitable gifts because of subsection 118.1(5) of the Act which provides that where an individual by his will makes a gift to a donee described in subsection 118.1(1), the gift shall, for the purposes of section 118.1, be deemed to have been made by the individual in the taxation year in which the individual dies. Pursuant to subsection 118.1(4) of the Act, the unused portion of such gift may be carried back to the immediately preceding year.

It is our view that a donation is not made pursuant to a will as required under subsection 118.1(5) of the Act where the beneficiary of an estate makes an irrevocable authorization as mentioned in paragraph 6 above. Accordingly, no tax credit for charitable gifts pursuant to the will can be allowed in the circumstances under section 118.1 of the Act for the 1993 and 1994 taxation years.

for Director
Financial Industries Division
Income Tax Rulings and
Interpretations Directorate
Policy and Legislation Branch