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:
Where Air Miles are transferred to a charity for missionary travel, what are the income tax implications to both the charity and the missionary when the Air Miles are used?
Position:
1. A registered charity may issue an official tax receipt for a gift of credits earned under an awards program provided that the credits can be transferred to the charity and the value of the credits donated can be reasonably estimated. The charity will be required to include the value of the credits in computing its income. Where the charity has issued a receipt for the credits, the value of the credits will also be included in the charity's disbursement quota calculation.
2. Provided that the airfare is given to the missionary to be used in connection with the charitable activities of the charity, there are no income tax implications to the missionary.
Reasons:
1. The term "property" is broadly defined in subsection 248(1) to include a right of any kind whatever. Since credits earned under an awards program give the individual a right to redeem the credits for certain benefits under the program, it is our view that the credits constitute property and therefore can be the subject of a gift.
2. The airfare is not available for the personal use of the missionary.
January 12, 2000
XXXXXXXXXX TSO HEADQUARTERS
XXXXXXXXXX J. Leigh
Business Service (613) 952-1505
1999-000709
Donation of Air Miles
This is in reply to your memorandum of July 22, 1999, concerning a situation where a church and the members of the congregation pool their individual Air Miles entitlements and use these to pay for airfares for missionary travel. The church has written to you requesting clarification with respect to the income tax implications to both the church and the individual missionary when the Air Miles are used. We apologize for the delay in responding.
Official tax receipt
As indicated in paragraph 3 of IT-110R3, a gift, for the purposes of sections 110.1 and 118.1 of the Income Tax Act (the "Act") is a voluntary transfer of property without valuable consideration. The term "property" is broadly defined in subsection 248(1) of the Act to include a right of any kind whatever. Since Air Miles or points earned by an individual under a similar awards program ("credits") give the individual a right to redeem the credits for airfare or other benefits, it is our view that the credits constitute property and therefore can be the subject of a gift provided that the credits can be transferred to the registered charity and their value can be reasonably estimated. In such circumstances, a receipt may be issued for the value of the credits donated. However, a receipt should not be issued if the value of the credits cannot be determined such as when the number of credits donated is insufficient for redemption under the particular awards program.
Tax implications to the charity
Paragraph 149.1(12)(b) of the Act provides that a charity must generally include in computing its income for a taxation year all gifts received by it in the year. Accordingly, the charity must include the value of the credits donated to it in computing its income. In addition, where the charity has issued official tax receipts for the credits, pursuant to the disbursement quota rules in section 149.1 of the Act, the value of the credits must also be included in the charity's disbursement quota calculation.
When the credits are redeemed by the charity for airfares or other awards to be used in connection with its charitable activities, it is our view that the value of the awards would be considered an expenditure on charitable activities for disbursement quota purposes.
Tax implications to the missionary
The church seems to be under the impression that only its employees would be subject to income tax on the value of the airfare. Based on the premise that the airfare is given to the missionary to be used in connection with the church's charitable activities, there are no income tax implications to the missionary even if the missionary is an employee of the church.
We hope that our comments are of assistance.
F. Lee Workman
Manager
Financial Institutions Section
Financial Industries Division
Income Tax Rulings Directorate
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