5 February 1997 External T.I. 963455A - GIFT SUBJECT TO PRE-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 gift where donation made as a pre-condition of subdivision approval?

Position:

Does not qualify as a gift.

Reasons:

Not voluntary and a material benefit flows to the donor.

	                                     	963345
XXXXXXXXXX	                            Wm. P. Guglich

Attention: XXXXXXXXXX

February 5, 1997

Dear Sirs:

Re: Ecological Gift

This is in reply to your letter of September 30, 1996, concerning grants of conservation easements as described in section 22.1 of the Alberta Environmental Protection and Enhancement Act. We apologize for the delay in our reply.

You describe a situation where a municipality grants the subdivision application but only on condition that the landowner first enters into a conservation easement with the municipality.

You requested our views as to whether the granting of a conservation easement as described above could qualify as an ecological gift for purposes of subsection 118.1(1) of the Income Tax Act (the "Act").

The word "gift" is not defined in the Act and therefore assumes its common law meaning. In our view, a gift at common law is a voluntary transfer of 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 grant 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 a grant to be considered a gift, it must be made without conditions, from detached and disinterested generosity, out of affection, respect, charity or like impulses.

In the situation described in your letter the grant would not be voluntary and since it is made as a pre-condition of the subdivision approval there would be a material benefit flowing to the donor. Consequently, the grant of the conservation easement in the situation described above would not qualify as a gift.

We trust our comments will be of assistance to you.

Yours truly,

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