2 June 1998 External T.I. 9730765 F - DONS AUX USA, CONV. FISCALE XXI, PARA. 6

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:

When paragraph 6 of Article XXI of the Convention deems a gift to be a "gift to a registered charity" can a taxpayer make a designation under subsection 118.1(6) of the Act with respect to the particular gift?

Position:

Yes, the taxpayer can make the designation.

Reasons:

The definition of "total charitable gifts" includes gifts to a registered charity.

5-973076
XXXXXXXXXX Marie-Marthe Gagnon

June 2, 1998

Dear XXXXXXXXXX:

Re: Interaction of subsection 118.1(6) of the Income Tax Act and
paragraph 6 of Article XXI of the Canada-U.S. Income Tax Convention

This is in reply to your letter of November 14, 1997, in which you requested information regarding the interaction of subsection 118.1(6) of the Income Tax Act (hereafter the “Act”) and paragraph 6 of Article XXI of the Canada-U.S. Income Tax Convention (hereafter the “Convention”). We apologize for the delay in responding to your letter.

Facts

Mr. A is a taxpayer resident in Canada for the purposes of the Act and the Convention. He makes a gift to a qualifying U.S. charity. The gift is a capital property to Mr. A. The property is not located in Canada. Paragraph 6 of Article XXI of the Convention deems this gift to be a "gift to a registered charity” for the purpose of Canadian taxation.

Question

You ask whether Mr. A can make a designation under subsection 118.1(6) of the Act with respect to this particular gift?

Our Comments

Our Directorate will only deal with inquiry relating to an actual proposed transaction which involves a specific taxpayer in the form of an advance income tax ruling request as described in Information Circular 70-6R3 (dated December 30, 1996). However, we provide the following general comments which, in accordance with the above-mentioned Information Circular, are not binding on the Department with respect to a particular factual situation.

As provided in subsection 118.1(6) of the Act, a designation is available, inter alia, for gifts of capital property to a donee described in the definition of “total charitable gifts”. Since the Convention deems the gift to be a “gift to a registered charity” for the purposes of Canadian taxation and that subsection 118.1(1) includes a registered charity among the prescribed donees, our view is that, provided that all the requirements prescribed in paragraph 6 of Article XXI of the Convention are fulfilled, Mr. A may make a designation under subsection 118.1(6) of the Act with respect to the particular gift.

We trust our comments will be of assistance to you.

Yours truly,

Maurice Bisson, CGA
for Director
Reorganizations and International Division
Income Tax Rulings and Interpretations Directorate
Policy and Legislation Branch
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