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 XXXXXXXXXX (a corporation without share capital), XXXXXXXXXX will be exempt from income tax.
2.Whether gifts made to the XXXXXXXXXX are Crown gifts.
Position TAKEN:
1.Yes.
2.Yes.
Reasons FOR POSITION TAKEN:
1.The XXXXXXXXXX will, for all purposes, be an agent of the Crown in right of XXXXXXXXXX by statute (pursuant to XXXXXXXXXX). A corporation that is for all purposes an agent of the provincial Crown and whose property and income is property of Her Majesty in right of the province is not liable to taxation, since any income of the corporation would be considered income of the provincial Crown. Such income is immune from taxation by virtue of a province's immunity from taxation with respect to lands and property (see section 125 of the Constitution Act, 1867).
2.As indicated in paragraph 7 of IT-297R2, "Gifts to Her Majesty in right of Canada and Her Majesty in right of the provinces include gifts to an agent of the Crown. Whether a particular entity is an agent of the Crown in right of Canada or a province depends on whether the law creating the entity (a corporation, commission, gallery, etc.) expressly makes it an agent of the Crown, or the entity is an agent of the Crown at common law."
XXXXXXXXXX 1-962094
XXXXXXXXXX
Attention: XXXXXXXXXX
XXXXXXXXXX, 1996
Dear Sirs:
Re: Advance Income Tax Ruling
XXXXXXXXXX
This is in reply to your letter of XXXXXXXXXX, wherein you provided additional information for, and requested that we proceed with, the advance income tax ruling you requested on XXXXXXXXXX on behalf of the above-referenced taxpayers. We also acknowledge your letter of XXXXXXXXXX and our various telephone conversations (XXXXXXXXXX).
To the best of your knowledge and that of the taxpayers involved, none of the issues involved in the requested rulings is being considered by a Tax Services Office or a Taxation Centre in connection with an income tax return already filed and none of the issues is under objection or appeal.
Our understanding of the facts, proposed transactions and purpose of the proposed transactions is as follows:
FACTS
1. XXXXXXXXXX
2. XXXXXXXXXX
3. XXXXXXXXXX
4. XXXXXXXXXX
XXXXXXXXXX
5.A corporation created pursuant to XXXXXXXXXX will be in the form of a corporation without share capital.
6. XXXXXXXXXX
7. XXXXXXXXXX
8. XXXXXXXXXX
9. XXXXXXXXXX
10. XXXXXXXXXX
11.XXXXXXXXXX as a corporation incorporated by or under an act of the XXXXXXXXXX whose members are appointed by XXXXXXXXXX will qualify as a "Provincial corporation" and as a "Provincial agency" subject to the terms of the
XXXXXXXXXX
PROPOSED TRANSACTIONS
12. XXXXXXXXXX
13.The trustees of the XXXXXXXXXX will pass such by-laws as are necessary for the XXXXXXXXXX to achieve the purposes described in paragraph 6 above and to undertake such activities as they consider necessary to solicit and receive donations from the public for those purposes. These by-laws will be subject to the approval of the XXXXXXXXXX before becoming effective.
PURPOSE OF THE PROPOSED TRANSACTIONS
14. XXXXXXXXXX
15. XXXXXXXXXX
1. XXXXXXXXXX
2. XXXXXXXXXX
RULINGS
Provided that the preceding statements constitute a complete and accurate disclosure of all of the relevant facts, proposed transactions, and purpose of the proposed transactions, and provided that the proposed transactions are completed in the manner described above, our rulings are as follows:
A.Provided that the XXXXXXXXXX is at all relevant times for all purposes an agent of the Crown in right of XXXXXXXXXX, whose property and income is property of Her Majesty in right of XXXXXXXXXX, we confirm that the XXXXXXXXXX will not be subject to income tax, since any income of the XXXXXXXXXX would be considered income of the provincial Crown.
B.We confirm that gifts made by a donor, which is a corporation, to the XXXXXXXXXX in its capacity as agent of the Crown in right of XXXXXXXXXX, will qualify for a deduction under paragraph 110.1(1)(b) of the Income Tax Act (the "Act"), subject to the restrictions on deductibility provided for therein and provided official receipts containing prescribed information are filed with the Minister, as required by subsection 110.1(2) of the Act.
C.We confirm that gifts made by a donor, who is an individual, to the XXXXXXXXXX in its capacity as agent of the Crown in right of XXXXXXXXXX, will entitle the individual to a tax credit calculated in the manner provided in subsection 118.1(3) of the Act, on the basis that the gifts are included in calculating the individual's "total Crown gifts" pursuant to the definition of that term in subsection 118.1(1) of the Act, provided official receipts containing prescribed information are filed with the Minister as required by subsection 118.1(2) of the Act.
Rulings B and C apply to gifts which are true gifts at common law. In our view, a true gift is a voluntary transfer of real or personal property from a donor, who must freely dispose of his or her property to a donee who receives the property given. The transaction may not result directly or indirectly in a right, privilege, material benefit or advantage to the donor or to a person designated by the donor. To qualify, the donation must be in the form of an outright gift. Any legal obligation on the donor would cause the transfer to lose its status as a gift. Further, in order for an expenditure to be considered a gift, it must be made without conditions, from detached and disinterested generosity, out of affection, respect, or charity or like impulses, and not from the constraining forces of any moral or legal duty. The donee must have an unfettered right to use a donation as it wishes. However, it is the Department's practice to view donations subject to a general direction from the donor as acceptable, provided that no benefit accrues to the donor, the directed gift does not benefit any person not dealing at arm's length with the donor and decisions regarding utilization of the donation within a program rest with the donee (i.e., the XXXXXXXXXX).
The above rulings are given subject to the limitations and qualifications set out in Information Circular 70-6R2 dated September 28, 1990 and the Special Release thereto dated September 30, 1992, and are binding, provided that the Foundations Regulations described herein are promulgated in substantially the same terms, with respect to gifts made by XXXXXXXXXX.
These rulings are based on the Act in its present form and do not take into consideration any proposed amendments to the Act.
Yours truly,
R. Albert
for Director
Business and Publications Division
Income Tax Rulings and
Interpretations Directorate
Policy and Legislation Branch
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