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:
1. Where a work of art is donated, is the date of donation to be indicated on the official tax receipt the date title is transferred or the date the donee physically receives the gift?
2. In the case of a gift of cultural property, is the certification date relevant in determining the date of donation?
Position:
1. The date of donation to be indicated on the official tax receipt is the date the gift was made. Based on the information provided, the property becomes property of the donee only when the deed of gift is signed by the donee. Accordingly, it would appear that the date of donation is the date the deed is signed by the donee.
2. Pursuant to the definition of “total cultural gifts” in subsection 118.1(1), the property should have been certified at the time the gift was made. Therefore, it is our view that the certification date is not usually relevant in determining the date of donation.
Reasons:
Common law definition of gift and legislation.
XXXXXXXXXX 5-980481
J. Leigh
May 20, 1998
Dear Madam:
Re: Charitable Donations
This is in response to your letter of February 18, 1998 and further to our telephone conversation (XXXXXXXXXX/Leigh) of April 16, 1998.
Your query relates to a situation where a not-for-profit organization receives donations in the form of gifts in kind, specifically works of art. The process, as described in your letter, begins when the donor initiates the donation with a letter of intent. The donor signs a deed of gift to the donee. The donee physically receives the gift and the donor is then issued a tax receipt. You advise that the gift becomes the property of the donee when the official deed of gift is signed by the donee. You have asked for our views as to whether the date of donation to be indicated on the official tax receipt should be the date when the official deed of gift is signed by the donee or when the property is physically received by the donee. Also, if, in the situation described, the gift is a gift of cultural property, you asked whether the date of donation would be the certification date, the date of physical receipt of the gift, the date the deed is signed or some other date.
The determination of the proper tax consequences relating to any particular situation will depend on an analysis of all the facts, documentation and other information pertaining to the situation. To the extent that you require assistance in determining the tax treatment with regard to a completed transaction, you should contact your district tax services office. To the extent that you require confirmation of the tax consequences of proposed transactions, your request should be the subject of a request for an advance income tax ruling. However, we can provide you with the following general comments which are not binding on the Department.
Part XXXV of the Income Tax Regulations sets out the information that must be provided on each official donation receipt. Where the donation is a gift of property other than cash, the date on which the donation was received (i.e., the date the gift was made) must be indicated on the donation receipt. As indicated in paragraph 3 of Interpretation Bulletin IT-110R3, for the purposes of the charitable donations tax credit, a gift is made if some property is transferred by a donor to a registered charity, the transfer is voluntary, and the transfer is made without expectation of return. We note that there must be a donor with the capacity to make the gift and there must be a donee to receive the property donated. Accordingly, in the circumstances described where the property donated does not become property of the donee until the official deed of gift is signed by the donee, it would appear that the date of donation is the date the deed is signed by the donee even though physical receipt of the gift may take place before that date or shortly thereafter.
Where an individual makes a gift of certified cultural property to a designated organization, subparagraph 39(1)(a)(i.1) of the Income Tax Act (the “Act”) provides that no capital gain will result from the disposition. However, by virtue of subsections 118.1(3) and (10) of the Act, the individual may claim a tax credit against the individual’s Part I tax otherwise payable based on the fair market value of the gift, as established by the Canadian Cultural Property Export Review Board. For a gift to qualify as a gift of cultural property, the requirements in the definition of “total cultural gifts” in subsection 118.1(1) of the Act must be met. One such requirement is that at the time the gift was made, the gift was designated under subsection 32(2) of the Cultural Property Export and Import Act. Since certification of the property should have been received at the time the property is donated, it is our view that the certification date is not usually relevant in determining the date of donation. Accordingly, as noted above, the date of donation in the situation described would appear to be when the donee signs the official deed of gift accepting the gift.
We trust that the above comments will be of assistance.
Yours truly,
Manager
Financial Institutions Section
Financial Industries Division
Income Tax Rulings and
Interpretations Directorate
Policy and Legislation Branch
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