16 March 1999 External T.I. 9833155 - DONATION

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 ISSUE:

What is the date of transfer for the determination of FMV of donated securities ?

Position TAKEN:

Must be determined according to the applicable law.

REASON FOR POSITION TAKEN:

Question of fact.

XXXXXXXXXX 			5-983315
G. Martineau
Attention:  XXXXXXXXXX 

March 16, 1999

Dear XXXXXXXXXX:

This is in reply to your letter of December 13, 1999 concerning the date of legal transfer for the determination of the fair market value of securities donated.

Interpretation Bulletin IT-133 discusses the timing of the disposition of shares in stock exchange transactions and states that, generally, there is a disposition and acquisition of shares on the settlement date which is usually two or three days subsequent to the trade date at which time the vendor is required to deliver the share certificates and the purchaser is required to make the payment therefor. It also indicates that the settlement date is used for determination of disposition since subparagraph 54(c)(i) of the Act defines disposition to be any transaction or event entitling a taxpayer to proceeds of disposition. In our view, a donated share traded on stock exchange would be appraised on the settlement date.

In other situations, the fair market value of shares donated must be done at the date the donor legally transfers ownership to the donee. In our view, the date of the legal transfer must be determined according to the appropriate law. For example, the Ontario Business Corporations Act mentions that a purchaser acquires the rights of a security upon its delivery and this act specifies when a delivery occurs.

We trust these comments will be satisfactory to your needs. Copies of Interpretation Bulletins are available at your local tax services office or may be accessed through the Department’s internet site at: http://www.rc.gc.ca.

Yours truly,

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