17 February 1998 External T.I. 9730875 - GIFT BY WILL

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 to a registered charity by a testamentary trust where the trustees have discretion as to whether or not a gift is to be made to the charity can qualify under subsection 118.1(5) of the Act.

Position:

No

Reasons:

In order for 118.1(5) to apply the terms of the will must expressly state that a specific gift is made to the registered charity. This requirement cannot be met if there is discretion on the part of the trustees as to whether or not a gift will be made to the charity.

973087
XXXXXXXXXX J.E. Grisé

Attention: XXXXXXXXXX

February 17, 1998

Dear Sirs:

Re: Gifts by Will

This is in reply to your letter of November 20, 1997 requesting our views as to whether payments made by trusts established under an individual's will would qualify as a gift deemed to have been made by the individual in the taxation year in which the individual died pursuant to subsection 118.1(5) of the Income Tax Act.

The two situations you describe both relate to a trust established under an individual's will whereby a sum of money is to be paid to two trustees in trust. The two trustees are both beneficiaries of the residue of the deceased's estate. The first trust described as a "discretionary fixed-term trust for registered charity" is to continue for five years and in each year the trustees may decide to pay all, a portion, or none of the income earned by the trust to a registered charity. At the end of the five years, the capital of the trust may be paid to the registered charity or into the residue of the estate. The second trust described as a "discretionary indefinite-term trust for registered charity" is to continue indefinitely and in each year, the trustees may decided to pay all, a portion, or none of the income earned by the trust to a registered charity. In addition, they may decide to pay all, a portion, or none of the capital of the trust to the charity.

In our view, any payment made by the two trusts to the registered charity would not qualify, pursuant to subsection 118.1(5) of the Income Tax Act, as having been made by the deceased in the taxation year in which the deceased died. Subsection 118.1(5) of the Act can only apply where an individual by the individual's will makes a gift to a qualified donee described in 118.1(1) of the Act. The above words would apply if a specific gift is made to a qualified donee expressly in and by the terms of the will itself without any discretion by trustees, i.e., the qualified donee on reading the will can expect that a specific gift (a specific bequest or a specific device) will be made to it. The discretionary powers of the trustees vis-à-vis the payments to the registered charities in the two trusts you have described precludes subsection 118.1(5) of the Act from applying. This would be the case even if the capital of the trust in your second example was distributed to the registered charity shortly after the date of death.

We hope our comments are of assistance.

Yours truly,

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