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 or not certain transaction result in gifts.
Position:
General comments on gifts.
Reasons:
Correspondent was looking at some very specific situations which would normally be dealt with by advance ruling.
973134
XXXXXXXXXX J.E. Grisé
Attention: XXXXXXXXXX
February 25, 1998
Dear Sirs:
Re: Gifts
This is in reply to your letter of October 30, 1997 requesting a technical interpretation with regard to whether certain transactions could be classified as gifts for purposes of the Income Tax Act.
The determination of whether or not a transaction results in a gift for purposes of the Income Tax Act can only be made upon a complete examination of all the facts. Accordingly, we will provide you with general comments on our views on various factors relating to gifts. With respect to specific transactions, a prospective donor may wish to submit a request for an advance income tax ruling in the manner set out in Information Circular 70-6R3, Advance Income Tax Rulings.
As indicated in your letter, it is this Department's practice to view certain donations subject to a general direction from the donor to be acceptable as a gift for income tax purposes providing certain conditions are met. The general direction is often used where a registered charity operates several programs. In this respect, paragraph 15(f) of Interpretation Bulletin IT-110R2, Gifts and Official Donation Receipts, states, in part, that "donations subject to a general direction from the donor that the gift be used in a particular program operated by the charity are acceptable, provided that no benefit accrues to the donor, the directed gift does not benefit any person not dealing at arm's length with the donor, and decisions regarding utilization of the donation within a program rests with the charity." Accordingly, a general direction to use land donated to a registered charity in a particular program of that charity could qualify as a gift for income tax purposes.
In our view, the donation of land to a registered charity with the stipulation that the charity provide the donor or the donor's family with access to the land is not a "general direction" and a benefit would accrue to the donor or a person not dealing at arm's length with the donor. However, if at the time of the donation of land there exists an easement that permits certain persons with access to the land for special purposes, the easement would not prevent the donation of the land from being a gift for income tax purposes. The fair market value of such land would probably be adversely affected by the presence of such an easement.
The donation of land to a registered charity with the direction that the land never be alienated or only alienated after a certain period of time would not prevent the donation from being a gift for income tax purposes. Such a direction is expressly provided for in the Income Tax Act. In this respect, please refer to subparagraph 149.1(12)(b)(i) of the Income Tax Act which excludes in computing the income of a charity "a gift received subject to a trust or direction to the effect that the property given, or property substituted therefor, is to be held by the foundation for a period of not less than 10 years."
The donation to a registered charity that has as one of its main purposes the conservation and protection of Canada's environmental heritage of a perpetual servitude for the use and benefit of a dominant land may qualify as part of a taxpayer's "total ecological gifts" in subsection 118.1(1) of the Income Tax Act, if the land on which the servitude is placed can be certified by the Minister of the Environment to be ecologically sensitive land. The donation of a servitude to a registered charity that does not have as one of its main purposes the conservation and protection of Canada's environmental heritage may also qualify as a gift for income tax purposes, but the fair market value of such a gift could not be determined pursuant to proposed subsection 118.1(12) of the Act. The fair market value of a servitude without the deeming provision of proposed subsection 118.1(12) of the Act would likely be a nominal amount.
The naming of land after the donor should not, in and by itself, impair the donation of the land as a gift for income tax purposes.
Please refer to Interpretation Bulletin IT-226R, Gift to a Charity of a Residual Interest in Real Property or an Equitable Interest in a Trust, for a discussion on the donation of a residual interest in real property.
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
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