2 March 1999 External T.I. 9810755 - 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: FMV of gift to be put on receipt.

Position: The FMV immediately before death

Reasons: The gift is deemed to have been made immediately before death under 118.1(5).

XXXXXXXXXX 							981075
B. Kerr
Attention: XXXXXXXXXX 

March 2, 1999

Dear Sirs:

Re: Charitable Donations - Official Donation Receipts - Gift made by Will

This is in response to your letter of April 20, 1998, concerning official receipts for donations to a registered charity made by the will of a deceased taxpayer. You have noted that the taxpayer's legal representative did not make the designation provided for under subsection 118.1(6) of the Income Tax Act (the "Act"). You have requested our views concerning the timing of the gift and the amount of the gift.

Our Comments

Paragraph 70(5)(a) of the Act provides that where a taxpayer dies in a taxation year, the taxpayer is deemed to dispose of each capital property immediately before the taxpayer's death for proceeds equal to the fair market value of the property immediately before the death. Under paragraph 70(5)(b) of the Act any person who as a consequence of the taxpayer's death acquires any property that is deemed by paragraph (a) to have been disposed of by the taxpayer shall be deemed to have acquired it at the time of the death at a cost equal to its fair market value immediately before the death.

For gifts made after July, 1997, subsection 118.1(5) of the Act generally provides that where an individual by the individual's will makes a gift, the gift is deemed to have been made by the individual immediately before the individual died. Subsection 118.1(5) previously deemed the gift to have been made by the individual in the taxation year in which the individual died. While subsection 118.1(5) does not expressly establish the amount of the gift, it is, in our view, reasonable to interpret the provision such that the amount of the gift in these circumstances would be the fair market value immediately before the individual's death.

Accordingly, we therefore agree that where an individual by his will makes a gift of property to a charity, in completing the receipt the charity should indicate the date of the actual transfer of the legal title, whether in the year of death or a subsequent year, while the amount of the gift indicated on the receipt should be the fair market value of the property immediately before the donor's death. Furthermore, the fact that an election is available to the donor under subsection 118.1(6) whereby proceeds other than fair market value may be elected upon does not affect the obligation of the charity to indicate the fair market value of the property on the receipt.

We apologize for the delay in replying to your letter but trust these comments are of assistance.

Yours truly,

for Director
Financial Industries Division
Income Tax Rulings and
Interpretations Directorate
Policy and Legislation Branch