29 August 1996 External T.I. 9624045 - DONATION OF XXXXXXXXXX

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.

									962404
XXXXXXXXXX							B. Kerr

Attention: XXXXXXXXXX

August 29, 1996

Dear Sirs:

Re: Relocation and Restoration of Rural Heritage Property

This is in reply to your letter of July 10, 1996, concerning the donation of a particular property XXXXXXXXXX and whether an official income tax receipt can be issued for an amount equal to its appraised value.

You have described a proposed transaction that involves

XXXXXXXXXX

Our Comments

The situation described in your letter involves actual proposed transactions with identifiable taxpayers. Assurance as to the tax consequences of actual proposed transactions will only be given in the context of an advance income tax ruling. The procedures for requesting an advance income tax ruling are outlined in Information Circular 70-6R2 dated September 28, 1990, and the Special Release thereto dated September 30, 1992, issued by Revenue Canada, Taxation. As stated in paragraph 14(f) therein, the Department does not provide rulings where the matter involved is the determination of fair market value of property. However, we can offer the following general comments.

Where a taxpayer has disposed of property to any person by way of gift inter vivos, subparagraph 69(1)(b)(ii) of the Income tax Act (the "Act") deems the taxpayer to have received proceeds of disposition equal to the fair market value of the property. Accordingly, the owner may have a capital gain or recaptured depreciation. However, in the case of the donation of capital property to a donee described in the definition of "total charitable gifts" or "total crown gifts" in subsection 118.1(1) of the Act, provided that the fair market value of the property exceeds its adjusted cost base, the provisions of subsection 118.1(6) may apply to allow the taxpayer to designate a lesser amount to be the proceeds of disposition and the fair market value of a gift. In the case of certain Canadian cultural property, subparagraph 39(1)(a)(i.1) of the Act may apply to eliminate the capital gain on the disposition to designated cultural institutions. You have not indicated whether the property in question is the type referred to in subparagraph 39(1)(a)(i.1), which, inter alia, requires a determination by the Canadian Cultural Property Export Review Board.

In order to qualify as a charitable donation, there must be a true gift at common law, which is a question of fact. In our view, a true 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. 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, or charity or like impulses, and not from the constraining forces of any moral or legal duty. The donee must have an unfettered right to use a donation as they wish. However, it is the Department's practice to view donations subject to a general direction from the donor as acceptable, provided that no benefit accrues to the donor, the directed gift does not benefit any person not dealing at arm's length with the donor and decisions regarding utilization of the donation within a program rest with the donee.

Given that a direct sale to XXXXXXXXXX has already been contemplated and the limited role of XXXXXXXXXX in this transaction, it appears that XXXXXXXXXX does not have an unfettered right to use the donation as they wish and that decisions regarding utilization of the donation do not appear to rest with XXXXXXXXXX In our view, XXXXXXXXXX is merely a conduit and that the donee is in fact XXXXXXXXXX which itself cannot issue charitable donation receipts. Accordingly, a charitable donation receipt should not be issued.

With respect to the donation of services by the moving company, as stated in paragraphs 3(a) and 16(d) of Interpretation Bulletin IT-110R2, contributions of services which are not property do not qualify as a gift. However, there is nothing to prohibit a charity from paying for services and later accepting the return of all or a portion of the payment as a gift, provided it is voluntary. The donor must, in such an arrangement, account for the taxable income that would be realized.

We trust that these comments will be of assistance.

Yours truly,

R. Albert
for Director
Business and Publications Division
Income Tax Rulings and
Interpretations Directorate
Policy and Legislation Branch