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 charitable receipts may be issued to contributors/donors who buy XXXXXXXXXX and make a contribution over and above the price of the XXXXXXXXXX in a single transaction.
A binding ruling was also requested.
Position TAKEN:
Can't issue receipts for donation purposes.
Can't provided an advance income tax ruling.
Reasons FOR POSITION TAKEN:
The inducement is of value and the contribution does not meet the general requirements. There cannot be split receipting.
The request was not provided in the proper form to provide an advance income tax ruling.
L. Barrows
XXXXXXXXXX 960085
Attention: XXXXXXXXXX
February 21, 1996
Dear XXXXXXXXXX:
Re: Advance Income Tax Ruling-Issuance of Charitable Receipts
This is in reply to your letter of December 11, 1995 in which you requested an advance income tax ruling in respect of the issuance of charitable receipts to contributors/donors in situations involving the purchase of goods from a charity.
Specifically, you describe proposed transactions where XXXXXXXXXX items will be acquired by a charitable organization from wholesalers. The charity will add a 15% mark-up to the wholesale cost and this will represent the price paid by the contributor/donor for the item. However, the amount actually contributed to the charity will be in excess of the purchase price of the goods and this excess will represent a donation for which a charitable receipt will be issued to the contributor/donor.
Please be advised that the procedures for obtaining an advance tax ruling are contained in Information Circular 70-6R2 dated September 28, 1990, and the Special Release thereto, dated September 30, 1992 (copies enclosed). A taxpayer contemplating a business venture may request an advance ruling as to how the Department would interpret specific provisions of the existing income tax law as it applies to particular proposed transactions of the venture. As rulings given by this Department will have application only to the taxpayer or taxpayers requesting it, they are rarely given on behalf of unnamed persons such as the donors and donees of various charitable donations. Rulings are also not given on questions of fact unless it is possible to pre-determine all the material facts and those facts can reasonably be expected to prevail or be made to prevail. In addition, since advance rulings are billed hourly based on the time spent, we are unable to provide you with a total estimated cost. Paragraph 18 of the Circular explains that the current fee is $90 plus GST for each hour or part thereof spent on the ruling request and that a deposit of $481.50 is required at the time the ruling is requested. As a result, while we are unable to provide you with an advance ruling at this time for the foregoing reasons, we can provide the following general comments.
As indicated in paragraph 3 of Interpretation Bulletin IT-110R2, a gift, for the purposes of sections 110.1 and 118.1, is a voluntary transfer of property without valuable consideration. A gift can be said to have been made where all of the following conditions are satisfied:
(a)property (usually cash) is transferred by a donor to a registered charity;
(b)the transfer is voluntary; and
(c)no consideration or benefit accrues to the donor or to anyone designated by the donor as a result of the transfer.
The general rule that no benefit of any kind may be made to a donor does not include items of little or no value which are given by the charity as a small token of its appreciation. These items have no resale value and, as a result, the inducement to the donor to make the donation is ignored.
However, where a donor receives an item of more than nominal value as an inducement, a benefit accrues to the donor and the contribution is not a gift. This is even so when the amount of the contribution exceeds the value of the inducement received in return for the contribution. Accordingly, any donation must be separate from and entirely unrelated to the purchase of the item of value.
Whether or not there are separate and unrelated transactions involving a donation and purchase of an item is a question of fact which must be considered on a case by case basis. Generally, where anyone can purchase the item without making any other payment, any additional contribution made by a purchaser as a separate or independent transaction will normally be considered a gift for which a charitable receipt may be issued. Conversely, where anyone can only purchase the item if a contribution is made (ie., a single or related transaction), an official receipt may not be issued. In order to accept that a donation has been made, we would have to consider that a portion of the money contributed is for the item with the balance being a donation. The Department has for many years permitted split receipting with certain fund-raising events involving the sale of tickets for dinners, balls, concerts and shows (paragraphs 4 to 8 of IT-110R2). It has, however, refused to extend this exception to the general rule to anything other than such events.
In your case, based on the limited information provided, we would view the proposed transactions as single or related for which split receipting would not be acceptable. Consequently, we are of the opinion that charitable receipts could not be issued for the type of fund-raising events proposed.
We trust 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
Enclosures
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