16 November 1999 External T.I. 9925595 - GIFT OR SALE

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 the disposition of a property by a parent to a child for the nominal amount of $1.00 constitutes a gift for purposes of paragraph 69(1)(c) of the Income Tax Act.

POSITION: Cannot give such an opinion.

Reasons: It is a question of fact as to whether or not a particular transaction results in a gift.

XXXXXXXXXX 		992559
J. E. Grisé
XXXXXXXXXX 

Attention: XXXXXXXXXX

November 16, 1999

Dear Sirs:

Re: Paragraph 69(1)(c) of the Income Tax Act (the Act)

This is in reply to your letter of September 13, 1999, requesting a technical interpretation on the possible application of paragraph 69(1)(c) of the Act where a child purchases a property from the child's parent for the nominal amount of $1.00.

Paragraph 69(1)(c) of the Act will apply where a taxpayer has acquired property by way of "gift, bequest or inheritance". The term "gift" is not defined in the Act and therefore assumes its common law meaning. In our view, a gift at common law is a voluntary transfer of property from a donor, who must freely dispose of his or her property to a donee who receives the property given. The transaction may not result directly or indirectly in a right, privilege, material benefit, or advantage to the donor or to a person designated by the donor. To qualify, the donation must be in the form of an outright gift. Any legal obligation on the donor would cause the transfer to lose its status as a gift. Further, in order for a donation to be considered a gift, it must be made without conditions, from detached and disinterested generosity, out of affection, respect, charity or like impulses.

In certain circumstances. the Agency may be willing to accept that the transfer of a property between non-arm's length parties for the nominal amount of $1.00 could result in the transferee having received a gift. However, the determination as to whether a transfer of property is a gift can only be made upon a complete examination of all the facts.

We hope our comments are helpful.

Yours truly,

John Oulton
for Director
Business and Publications Division
Income Tax Rulings and
Interpretations Directorate
Policy and Legislation Branch

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