10 August 1990 Income Tax Severed Letter ACC9331 - Gifts of Rental Properties

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.

Barbara Darling                     Business and General
Director General                        Division
Registration Directorate            W.P. Guglich
                                    957-2102
J. Skelton

                                    900883

Subject:  24(1)
          Gifts of Rental Properties

This is in reply to your memorandum of May 22, 1990 concerning the status of 24(1) a registered charity, for purposes of paragraphs 149.1(4)(a) and (d) of the Act.

We understand that

24(1) 23

As for judicial consideration of the meaning of the word "incurred", Mr. Justice Lacourciere in R. v. Allan, 45 C.C.C. (2nd) 524 at p. 529 commented that:

         The Shorter Oxford English Dictionary, 3rd ed., defines
         the word "incur" as meaning "to render oneself liable
         to...; to bring upon oneself".  The definition of
         "incur" found in Webster's Third International
         Dictionary includes the following: "becomes liable or
         subject to; bring upon oneself".  I rely upon these
         definitions and treat the word "incur" in section 35 of
         the Interpretation Act as being synonymous with "liable
         to" or "subject to".

In was held in Hasson b. Hammel (1977) O.R. (2nd) 517 (Co. Ct.) that "expenses are not 'incurred' unless there is some legal liability to pay them", while in Pickle Crow Gold Mines Ltd. v. M.N.R. 55 DTC 1001, Mr. Justice Cameron at p. 1003, expressed the view that:

         ...the words "expenses incurred by the taxpayer" have a
         natural and ordinary meaning of expenses either paid out
         by the taxpayer or which he has become liable to pay.

24(1)

It is not necessary to consider the application of paragraph 149.1(4)(a). In general we would agree with your understanding of the business issue, however there are cases (e.g. Cadboro Bay Holdings, 77 DTC 5115) in which the principal activity consisted only of owning and renting out a single building. In any event it is question of fact whether a private foundation "carries on a business".

24(1)

It also appears that the establishment of a trust would not circumvent 19(1) difficulties.

23

B.W. Dath Director Business and General Division Rulings Directorate Legislative and Intergovernmental Affairs Branch