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 the amount to be used in determining the amount of a gift of capital property for purposes of the letter "A" in the algebraic formula of the definition of "disbursement quota" is the fair market value of the property or the amount designated by the taxpayer under subsection 110.1(3) or 118.1(6), as the case may be.
Position TAKEN:
The amount to be used is the fair market value of the capital property at the time the property was gifted.
Reasons FOR POSITION TAKEN:
The letter "A" in the algebraic formula in the definition of disbursement quota in subsection 149.1(1) of the Act represents "the total of all amounts each of which is the amount of a gift for which the foundation issued a receipt described in subsection 110.1(2) or 118.1(2) ...". The receipt described in subsections 110.1(2) and 118.1(2) is a receipt containing prescribed information. Where capital property is gifted, subparagraph 3501(1)(h)(ii) of the Income Tax Regulations provides that the official receipt issued by the registered organization must show the fair market value of the property at the time the gift was made as being the amount of the gift.
5-950789
XXXXXXXXXX C. Chouinard
Attention: XXXXXXXXXX
August 3, 1995
Dear Madam:
Re: Definition of "Disbursement Quota"
We are writing in reply to your letter of March 22, 1995, wherein you requested our comments on the determination of the amount of a gift for purposes of the letter "A" in the definition of "disbursement quota" in subsection 149.1(1) of the Income Tax Act (the "Act"), where capital property is gifted to a charitable foundation.
More specifically, you have asked us to reconcile two technical interpretations dealing with this issue, one of which indicates that the amount of the gift would be the fair market value of the property, while the other states that the amount of the gift would be the amount designated by the taxpayer under subsection 110.1(3) or 118.1(6) of the Act, as the case may be.
The letter "A" in the algebraic formula in the definition of disbursement quota in subsection 149.1(1) of the Act represents "the total of all amounts each of which is the amount of a gift for which the foundation issued a receipt described in subsection 110.1(2) or 118.1(2) ...". Subsections 110.1(2) and 118.1(2) essentially provide that a tax deduction, in the case of a corporation, or a tax credit, in the case of an individual, cannot be claimed, unless the making of the gift referred to in subsection 110.1(1) or 118.1(1) of the Act is proven by filing a receipt containing prescribed information. Subparagraph 3501(1)(h)(ii) of the Income Tax Regulations (the "Regulations") provides that every official receipt issued by a registered organization must show the amount of the gift which, where the donation is a gift of property other than cash, is the fair market value of the property at the time that the gift was made.
In our view, where capital property is gifted, the amount of the gift for purposes of the letter "A" in the definition of "disbursement quota" is the amount in respect of which a receipt was issued, that is, the fair market value of the gift. Although subsections 110.1(3) and 118.1(6) of the Act deem the amount designated by the taxpayer in respect of a capital property that is gifted to be the fair market value of the gift, these provisions only apply for purposes of subsections 110.1(1) and 118.1(1) of the Act. Therefore, regardless of whether a taxpayer makes a designation under subsection 110.1(3) or 118.1(6) of the Act, the amount reported on the official receipt issued by a charity in respect of a gift of capital property must, according to subparagraph 3501(1)(h)(ii) of the Regulations, reflect the fair market value of the property at the time it was gifted. Accordingly, in our view, the correct interpretation of the application of the above-mentioned provisions is reflected in our July 11, 1994 letter.
We trust that these comments will be of assistance.
Yours truly,
R. Albert
for Director
Business and General Division
Income Tax Rulings and
Interpretations Directorate
Policy and Legislation Branch
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