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:
Under proposed gifting legislation, can a tax receipt be issued when parents pay an amount for the right for their children to attend a private school?
Position: Provided general comments only.
Reasons: Unable to provide definitive comments due to insufficient information.
Question 13: Presenter: Don Murray
Some private K-12 schools utilize a "creative" formula for the amounts that parents pay for the right for their children to attend such schools and have issued charitable donation receipts for a portion of the amounts that are paid by parents. Given the proposed gifting legislation released on December 20, 2002, could the CCRA comment on the ability of such schools to now issue charitable donation receipts when parents pay amounts to the school in return for the right for their children to attend?
Response
Proposed subsections 248(30) to (33) contain new rules in determining whether a transfer of property to a qualified donee results in a gift for tax purposes where an "advantage" is provided to the donor. Pursuant to proposed subsection 248(30), the eligible amount of a gift is the excess of the fair market value of the property transferred to a qualified donee over the amount of the advantage provided to a donor. Proposed subsection 248(31) provides that the amount of the advantage is generally the value of any property, service, compensation or other benefit received or obtained by the donor as partial consideration for, or in gratitude for, the gift. Given that donative intent must be present for there to be a gift, proposed subsection 248(32) presumes donative intent to exist when the amount of the advantage does not exceed 80% of the fair market value of the transferred property.
Without knowing the full details of the "creative" formula and the schools involved, we are not in a position to provide definitive comments on whether the schools are entitled to issue tax receipts under the current legislation or the proposed gifting legislation. However, in applying the proposed gifting legislation to the situation described, the advantage provided to the parents would include the right for their children to attend the particular school. If the amount of the advantage provided does not exceed 80% of the payment made by the parents to the school and provided that the school is a qualified donee, a tax receipt may be issued for the eligible amount of the gift. We note that the school must be able to support the basis for the determination of the amount of the advantage provided by the school which would otherwise be assumed to be the amount paid by the parents to the school.
Supplementary Issues:
Does proposed subsection 248(32) preclude the issuance of a donation receipt where the value of the advantage to the donor exceeds 80% of the fair market value of the property transferred to the qualified donee?
Supplementary Response:
A charity may issue official donation receipts only for donations that are gifts. A gift may be recognized for purposes of the Income Tax Act where it is clear that a transfer of property is made with donative intent on behalf of the donor to enrich the donee. Where the value of the advantage given by a charity exceeds 80% of the value of property it has received, the charity generally should assume that no such intent existed.
The draft legislation provides that there may be exceptional circumstances in which a transfer of property will qualify as a gift for tax purposes notwithstanding that the amount of the advantage to the donor exceeded 80% of the value of the transferred property. This will occur only if the donor is able to establish to the satisfaction of the Minister that there was a clear intention to make a gift. While no formal procedures in this respect have been developed yet a request pursuant to proposed paragraph 248(32)(b) should be directed to the Director of Policy and Communications of the Charities Directorate.
All rights reserved. Permission is granted to electronically copy and to print in hard copy for internal use only. No part of this information may be reproduced, modified, transmitted or redistributed in any form or by any means, electronic, mechanical, photocopying, recording or otherwise, or stored in a retrieval system for any purpose other than noted above (including sales), without prior written permission of Canada Revenue Agency, Ottawa, Ontario K1A 0L5
© Her Majesty the Queen in Right of Canada, 2003
Tous droits réservés. Il est permis de copier sous forme électronique ou d'imprimer pour un usage interne seulement. Toutefois, il est interdit de reproduire, de modifier, de transmettre ou de redistributer de l'information, sous quelque forme ou par quelque moyen que ce soit, de facon électronique, méchanique, photocopies ou autre, ou par stockage dans des systèmes d'extraction ou pour tout usage autre que ceux susmentionnés (incluant pour fin commerciale), sans l'autorisation écrite préalable de l'Agence du revenu du Canada, Ottawa, Ontario K1A 0L5.
© Sa Majesté la Reine du Chef du Canada, 2003
Email this Content