30 November 1995 Ruling 9627043 - GIFT (TO XXXXXXXXXX) SUBJECT TO CONDITIONS

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 a $XXXXXXXXXX donation constitutes a gift for tax purposes, where the donation is subject to various conditions contained in an agreement between the donor (XXXXXXXXXX) and the donees?

Position TAKEN:

It constitutes a gift.

XXXXXXXXXX							3-962704
XXXXXXXXXX

Attention: XXXXXXXXXX

XXXXXXXXXX, 1996

Dear Sir:

Re: Advance Income Tax Ruling
XXXXXXXXXX

This is in reply to your letter of XXXXXXXXXX, in which you requested an advance income tax ruling on behalf of the above-noted taxpayers.

To the best of your knowledge and that of the taxpayers involved, none of the issues involved in the requested ruling is being considered by a Tax Services Office or a Tax Centre in connection with an income tax return already filed and none of the issues is under objection.

Our understanding of the facts, proposed transactions and purpose of the proposed transactions is as follows:

FACTS

1.XXXXXXXXXX (the "Individual") is a resident of Canada living in

XXXXXXXXXX

2. XXXXXXXXXX

3.XXXXXXXXXX Crown agent and gifts to XXXXXXXXXX constitute gifts to Her Majesty in right of the Province of XXXXXXXXXX

PROPOSED TRANSACTIONS

4.The Individual will donate $XXXXXXXXXX (the "Gift") to XXXXXXXXXX on or before the later of:

(a)XXXXXXXXXX; or

(b)within XXXXXXXXXX days of receiving the income tax ruling described herein.

5.The Individual will donate a further $XXXXXXXXXX (the "Bequest") to XXXXXXXXXX, by designating XXXXXXXXXX in XXXXXXXXXX last will and testament as a specific beneficiary, or by designating XXXXXXXXXX as a beneficiary of the gift, if any, made by the Individual in XXXXXXXXXX last will and testament to a private charitable foundation. At the option of the Individual, he may satisfy the requirement to make the Bequest by purchasing prior to XXXXXXXXXX and gifting to XXXXXXXXXX "strip bonds" issued by the Government of Canada or any province thereof or municipality therein having a value of not less than $XXXXXXXXXX upon maturity, which shall not be later than XXXXXXXXXX years from the date of the purchase and gift.

6.The Gift, as well as the Bequest, will be made provided that XXXXXXXXXX complies with certain provisions of an agreement entered into among the Individual, XXXXXXXXXX (the "Agreement").

7.Pursuant to the Agreement, the funds received by XXXXXXXXXX are to be paid to XXXXXXXXXX, to be designated by it as, and held in perpetuity (subject to certain events described in 10 below) in, "XXXXXXXXXX" which will be a separate and distinct designated and dedicated endowment.

XXXXXXXXXX

8. XXXXXXXXXX

9. XXXXXXXXXX

10. XXXXXXXXXX

11. XXXXXXXXXX

12.The Gift and the Bequest will be irrevocable, in that the Individual and XXXXXXXXXX heirs, executors, administrators and assigns will not be entitled to the return of the amounts donated to XXXXXXXXXX

PURPOSE OF THE PROPOSED TRANSACTIONS

13.The purpose of the Gift and the Bequest is to support

XXXXXXXXXX

RULING

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 ruling is as follows:

The Gift made by the Individual to XXXXXXXXXX in its capacity as agent of Her Majesty in right of XXXXXXXXXX, will be included in calculating the Individual's "total Crown gifts", to the extent provided in the definition of that term in subsection 118.1(1) of the Income Tax Act (the "Act"), and will entitle the Individual to a tax credit calculated in the manner provided in subsection 118.1(3) of the Act, provided an official receipt containing prescribed information is filed as required by subsection 118.1(2) of the Act.

The above ruling is 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 is binding provided the proposed transactions are completed before XXXXXXXXXX

Our ruling is based on the Act in its present form and does not take into consideration any proposed amendments to the Act.

COMMENTS

As regards to the rulings requested in respect of the Bequest, as indicated in our telephone conversation (XXXXXXXXXX), in accordance with paragraph 14(c) of Information Circular 70-6R2, we cannot issue rulings in respect of the Bequest, as the Bequest is to be made, and therefore the proposed transaction is to be completed, at some indefinite future time. However, we are prepared to offer the following non-binding comments.

When an individual makes a gift by will to a donee described in subsection 118.1(1) of the Act, the gift is 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 can be claimed in respect of the gift is determined in accordance with subsection 118.1(3) of the Act. Furthermore, the fair market value of a gift is the relevant amount in establishing an individual's "total gifts" under subsection 118.1(1) of the Act and for purposes of calculating the tax credit under subsection 118.1(3) of the Act. As stated in paragraph 6 of IT-297R2, Gifts in Kind to Charity and Others, valuation of a gift in kind is based on the fair market value as of the date of the gift; that is, the date on which beneficial ownership is transferred from the donor to the donee.

In our view, the Bequest made pursuant to the Individual's will directly to XXXXXXXXXX, in its capacity as agent of Her Majesty in right of XXXXXXXXXX, would entitle the Individual to a tax credit in the year of death, calculated in the manner provided in subsection 118.1(3) of the Act, on the basis that the gift would be 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 an official receipt containing prescribed information is filed as required by subsection 118.1(2) of the Act. If, in lieu of the Bequest, "strip bonds" are gifted by the Individual to XXXXXXXXXX, in its capacity as agent of Her Majesty in right of XXXXXXXXXX, the fair market value of the "strip bonds" at the time of the gift would be included in calculating the Individual's "total Crown gifts", to the extent provided in the definition of that term in subsection 118.1(1) of the Act, and will entitle the Individual to a tax credit calculated in the manner provided in subsection 118.1(3) of the Act, provided an official receipt containing prescribed information is filed as required by subsection 118.1(2) of the Act.

Yours truly,

for Director
Business and Publications Division
Income Tax Rulings and
Interpretations Directorate
Policy and Legislation Branch