18 October 1995 External T.I. 9523715 - GIFT OF CAPITAL PROPERTY BY NON-RESIDENT

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 provisions of subsections 118.1(5) and (6) apply to a gift, made by a non-resident individual's will to a registered charity, of real property situated in Canada.

Position TAKEN:

We did not issue a ruling (in accordance with paragraph 14(c) of Information Circular 70-6R2), as the transaction described in the ruling request is to be completed at some indefinite future time. However, we provided general comments on the application of the above-noted provisions to non-resident individuals. That is, when a non-resident individual makes a gift by will to a donee described in subsection 118.1(1), the gift will be deemed to have been made by the individual in the year of death, as provided in subsection 118.1(5). Furthermore, paragraph 118.1(6)(a) provides, inter alia, for a designation where a non-resident individual makes a gift of real property situated in Canada to a registered charity and paragraph 118.1(6)(b) provides only for a designation where a non-resident individual makes a gift of real property situated in Canada to The Nature Conservancy (i.e., a prescribed donee per Regulation 3504).

Reasons FOR POSITION TAKEN:

The Department's position with respect to the tax credit available for charitable gifts made by non-resident individuals is contained in paragraphs 15 and 16 of Interpretation Bulletin IT-171R2.

		3-952371
XXXXXXXXXX		M. Azzi

Attention: XXXXXXXXXX

October 18, 1995

Dear Madam:

Re: Advance Income Tax Ruling Request
XXXXXXXXXX

This is in reply to your letter of August 29, 1995, wherein you requested an advance income tax ruling on behalf of the above-noted taxpayer. We also acknowledge your letter of September 26, 1995 and our telephone conversation of October 5, 1995 (Azzi\XXXXXXXXXX).

As indicated during our telephone conversation, we do not provide an advance income tax ruling where a transaction is to be completed at some indefinite future time (see paragraph 14(c) of Information Circular 70-6R2 dated September 28, 1990). As this applies to the transaction described in your request, we cannot issue an advance ruling, and your deposit will be returned to you under separate cover. We can, however, offer the following general comments.

Our Comments

We understand that XXXXXXXXXX is not a resident of Canada (he is a resident of XXXXXXXXXX) and he wishes to donate, through his will on his death, a property situated in Canada, consisting of land and buildings, to a Canadian registered charity. The land and buildings are capital property to XXXXXXXXXX They are not used to earn income and, consequently, no capital cost allowance is claimed with respect to the buildings. You inquire as to whether the provisions of subsections 118.1(5) and (6) of the Income Tax Act (the "Act"), as it presently reads, would apply to XXXXXXXXXX (a non-resident) should the previously described gift be made.

The Department's position with respect to the tax credit available for charitable gifts made by non-resident individuals is contained in paragraphs 15 and 16 of Interpretation Bulletin IT-171R2 entitled Non-resident Individuals - Computation of Taxable Income Earned in Canada and Non-refundable Tax Credits. Those paragraphs provide that a tax credit may be claimed, to the extent permitted by section 118.1 of the Act, by a non-resident individual in computing Part I tax payable. Consequently, when a non-resident individual makes a gift by will to a donee described in subsection 118.1(1) of the Act, the gift will be deemed to have been made by the individual in the year of death, as provided in subsection 118.1(5) of the Act. The amount of the credit that may be claimed in respect of the gift is determined in accordance with subsection 118.1(3) of the Act.

In addition, where the gift is a gift of capital property to a donee described in the definition of "total charitable gifts" or "total Crown gifts" in subsection 118.1(1) of the Act, or a gift of real property situated in Canada to a prescribed donee, the individual's legal representative may designate an amount that will be deemed to be the individual's proceeds of disposition of the property and the fair market value of the gift made by the individual, subject to the requirements and limitations of subsection 118.1(6) of the Act. A registered charity is included in the definition of "total charitable gifts" and a "prescribed donee" is a donee listed in section 3504 of the Income Tax Regulations. To date, The Nature Conservancy, a charity established in the United States, is the only "prescribed donee". In our view, paragraph 118.1(6)(a) of the Act provides, inter alia, for a designation where a non-resident individual makes a gift of real property situated in Canada to a registered charity and paragraph 118.1(6)(b) of the Act provides only for a designation where a non-resident individual makes a gift of real property situated in Canada to The Nature Conservancy.

Please note that these comments represent our opinion of the law as it applies generally and, as stated in Information Circular 70-6R2, are not binding on the Department. Nevertheless, we hope our comments will be of assistance to you.

Yours truly,

R. Albert
for Director
Business and General Division
Income Tax Rulings and
Interpretations Directorate
Policy and Legislation Branch