17 April 2003 Internal T.I. 2003-0013427 - PROPOSED GIFTING LEG.-MULTIPLE GIFTS

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 CCRA.

Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle de l'ADRC.

Principal Issues:

Effect of an advantage on the calculation of eligible amount with regard to multiple donations for receipting purposes.

Position: Question of fact.

Reasons:

Generally, the advantage is taken into account in the calculation of a single donation but it may be acceptable in certain cases to issue a single receipt for all the donations made in the year.

								April 17, 2003

Charities Directorate						Income Tax Rulings
Susan Mott, A/Manager					  Directorate
Policy and Communications Division			Financial Institutions Section
J. Leigh
Attention:  Jane Waterfall					952-1505

								2003-001342

Effect of an advantage on the calculation of
eligible amount with regard to multiple donations

Generally, the advantage received by a donor will be taken into account in the calculation of a single donation. For example, if in a calendar year a donor makes 3 donations of $100 each to a particular registered charity and in respect of the second donation receives an article valued at $90, the eligible amount of the donor's gifts will be determined as follows:

	Gift #1	Gift #2	Gift #3

Property (cash) given to the charity	$100	$100		$100
Advantage received	     0	   90	     0
Eligible amount	$100	$   0*	$100

*The eligible amount is zero because the amount of the advantage exceeds 80% of the FMV of the property transferred to the charity.

While it would be acceptable for the charity to issue a single receipt indicating the fair market value ("FMV") of the property transferred to the charity ($300) and the eligible amount ($200), it might be less confusing to the donor if the charity issued 2 receipts (one covering Gift #1 and one covering Gift #3). Alternatively, the charity could issue a single receipt for the 2 donations where no advantage was received (eligible amount of $200). Regardless of which of the options the charity chooses, the donor should be provided with an explanation as to why the eligible amount for Gift #2 is nil.

There may be circumstances where the advantage provided by the charity does not relate to a specific donation but rather is in respect of all donations made in the year. With regard to the above example, the charity might indicate in its solicitation material that donors making contributions to the charity in the year totalling more than $100 will receive an article having a FMV of $90. In this case with regard to the above example, the eligible amount will be determined as follows:

Property (cash) given to the charity		$300
Advantage received				   90
Eligible amount				$210

When dealing with multiple donations, it is a question of fact as to whether any advantage received relates to a single donation or the series. For example, if the FMV of the advantage exceeds the FMV of the property transferred to the charity on a single donation, it would be reasonable to conclude that the advantage is in respect of all donations made in the year. With regard to the above example, if the FMV of the article was $125, then it would not be attributed solely to Gift #2 but rather to all gifts made in the year. The eligible amount would be $175 ($300 minus $125).

Another case we have been asked to consider is the situation where a donor is provided with an article (advantage) in consideration for a pledge to make donations over a number of years. Particularly since there is no guarantee that donations will be made in subsequent years, we are taking the view that the advantage will be taken into account in determining the eligible amount of the gift in the year in which the advantage is received. If, as in the case of the previous example, the FMV of the advantage exceeds donations made in the year, it may be appropriate to reduce the subsequent year's donations by the amount of the "excess advantage". If you encounter such a situation, we recommend that the case be referred to Rulings for further consideration.

If you have any concerns or suggestions with respect to the above, please advise us.

F. Lee Workman
Manager
Financial Institutions Section
Financial Industries Division
Income Tax Rulings Directorate