22 December 1997 External T.I. 9714875 - PROSPECTIVE GIFT TO A PROVINCIAL FOUNDATION

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 there is a gift when an individual transfers a property to a government agency (i.e., XXXXXXXXXX) who immediately turns the property over to an organization that is not a registered charity?

Position:

There is no gift in this situation.

Reasons:

The individual had previously negotiated to sell the property to the organization that will ultimately own the property in this scheme. The Foundation is simply being used as a conduit in order to make the transfer a gift subject to a tax credit by the transferee.

971487
XXXXXXXXXX J.E. Grisé

Attention: XXXXXXXXXX

December 22, 1997

Dear Sirs:

Re: Prospective Gift

This is in reply to your letter of May 26, 1997 in which you requested a review of our previous opinion of August 29, 1996 on the subject of a prospective gift of XXXXXXXXXX.

You have asked us to consider certain information that was not at our disposal when the opinion of August 29, 1996 was issued. First, you indicate that there was nothing on the record to suggest that the Foundation would not be in legal or practical control of its own property. Secondly, in the case of donations of buildings generally, there are certain special features (i.e., the ongoing operating costs of a building) which are characteristic of all such donations which should be considered.

As explained to XXXXXXXXXX in the course of a telephone conversation with Jacques Grisé, your letter did not contain any additional facts concerning the acquisition of the XXXXXXXXXX by the Foundation that would cause us to change our previous view that the transfer of the XXXXXXXXXX to the Foundation would not be a gift to the Foundation.

XXXXXXXXXX also indicated that the Foundation is now considering retaining ownership of heritage property transferred to the Foundation for no consideration and entering into long term contracts with third parties for the maintenance, upkeep, safeguard and use of such property. In our view, providing the Foundation is the beneficial owner of such a transferred property, the property may be considered a gift to the Foundation. In determining whether the Foundation has beneficial ownership, one should consider such factors as the right to possession, the right to collect rents, the right to call for the mortgaging of the property, the right to transfer title by sale, the obligation to repair, the obligation to pay property taxes and other relevant rights and obligations. Not all of these incidents of ownership need occur concurrently before it is concluded that the Foundation has beneficial ownership of the property, which is a question of fact in each particular case.

Yours truly,

John F. Oulton
for Director
Business and Publications Division
Income Tax Rulings and
Interpretations Directorate
Policy and Legislation Branch