4 January 1996 External T.I. 9524775 - Donation of Residual Interest

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 donation of residual interest considered a gift of Canadian Cultural Property?

Position:

No.

Reasons:

To qualify as a gift of Canadian Cultural Property all interests must be transferred.

		952477
XXXXXXXXXX	Wm. P. Guglich

Attention: XXXXXXXXXX

January 4, 1996

Dear Sirs:

Re: Testamentary Gifts of Cultural Property

This is in reply to your letter of September 15, 1995 requesting our views as to the status of certain testamentary gifts.

You have described a hypothetical situation where a testator or testatrix leaves, to a spousal trust created under the terms of his or her will, capital property that are objects that the Canadian Cultural Property Export Review Board has determined meet the criteria set out in paragraphs 29(3)(b) and (c) of the Cultural Property Export and Import Act. Upon the death of the surviving spouse the objects are to be transferred absolutely to one or more designated cultural institutions.

You request our views regarding the application of subsections 118.1(5), 118.1(10), 118.1(1) ("total cultural gifts") and 70(6) and subparagraph 39(1)(a)(i.1) of the Act.

OUR VIEWS

As stated in paragraph 12 of IT-407R3 it is the Department's view that the gift of an "object" (within the definition of "total cultural gifts" in subsection 118.1(1) and the disposition of an "object" (within subparagraph 39(1)(a)(i.1)) refers to the gift and disposition of all interests in the object or objects. Consequently, a gift of a residual interest in an object would not be viewed as the gift of an object. Therefore, the gift of a residual interest would not be included in "total cultural gifts" for purposes of subsection 118.1(1) of the Act and subparagraph 39(1)(a)(i.1) would not apply to exclude any capital gains.

IT-226R describes the Department's views regarding a gift of a residual interest in real property and the valuation of a residual interest in capital property.

We agree that, where a gift of a residual interest is made by the individual's will to a donee described in subsection 118.1(1) of the Act, subsection 118.1(5) deems the gift to have been made by the individual in the taxation year in which the individual dies. As regards the taxation year in which the property is transferred to the institution upon the death of the surviving spouse, there would be no capital gain or loss or any tax credit available to the spouse trust or spouse respecting the transfer.

Subsection 70(6) would apply to determine the proceeds of disposition of the life interest, transferred to the spouse trust, to which subsection 70(5) would otherwise apply.

We trust 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