15 April 1998 External T.I. 9800525 - CHARITABLE GIFT

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: Does A legal agreement to make gifts to a charity disqualify the donation ?

Position: Yes

Reasons: Gift pursuant to legal obligation rather than detached and disenterrested generosity.

XXXXXXXXXX 980052
C. Tremblay
Attention: XXXXXXXXXX

April 15, 1998

Dear Sir,

Re: Agreement to make a Gift to a Charity

This is in reply to your letter of December 22, 1997, wherein you set out a situation involving gifts to a charity.

Although the situation described in your letter appears to concern proposed transactions by identifiable taxpayers, it is not a matter on which we would normally rule since any conclusions would be heavily dependent on facts which would be impossible to establish at the time of the ruling request. We therefore are prepared to provide you with the following general comments.

The term “gift” is not defined in the Act and therefore assumes its common law meaning. Under common law, a bona fide gift is a voluntary transfer of real or personal property from a donor, who must freely dispose of his or her property, to a donee, who receives the property given. Therefore, 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 to be considered a gift, it must be made without conditions, from detached and disinterested generosity, out of affection, respect, or charity or like impulses, and not from the constraining forces of any moral or legal duty.

In the situation you describe, Mr. A. wants to ensure that after his death his beneficiaries (children) either give directly, or cause one or more corporations that they control or over which they have significant influence, to give gifts to one or more registered charities. To allow maximum flexibility, Mr. A could arrange to have his children and/or certain corporations enter into a written agreement, under seal, under which they would promise to make gifts (either in a specified amended amount or calculated by reference to some formula method) to the registered charities within a certain number of years after Mr. A’s death.

In our view, in the situation described , the amount paid to the charities after Mr. A’s death would not be considered gifts because Mr. A is imposing a legal duty on his beneficiaries and, as a result, they would not be making a gift to a charity from detached and disinterested generosity but rather from the constraining requirement of the legal obligation.

We trust our comments will be of assistance to you

Yours truly,

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