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:
We are asked to provide comments on the tax implications of gifting a building and land after December 20, 2002.
Position:
Provided general comments on the application of the draft gifting legislation in determining the eligible amount of a gift.
Reasons: Legislation and draft legislation.
2003-003658
XXXXXXXXXX Luisa A. Majerus
(613) 946-3558
December 29, 2003
Dear XXXXXXXXXX:
Re: Proposed Legislation on Split Receipting
This is in reply to your facsimile of September 2, 2003 in which you requested our views on the tax implications of a person donating property to a registered charity (the "charity") after December 20, 2002.
Specifically, you have asked us to consider a hypothetical situation where a person ("the donor") donates property that is land and building with a fair market value of $1,000,000 to the charity. The donor wants to receive a $500,000 donation receipt and $500,000 in cash. Can the charity issue a donation receipt to the donor and if so, for what amount?
Written confirmation of the tax implications inherent in particular transactions is given by this Directorate only where the transactions are proposed and are the subject matter of an Advance Income Tax Ruling request. Where the particular transactions are completed, the inquiry should be addressed to the relevant Tax Services Office. However, we are prepared to provide the following comments.
Interpretation Bulletin IT-110R3, "Gifts and Official Donation Receipts" discusses the tax benefits that may be available to a donor who makes a gift to charity. In general, a "gift" for purposes of the Income Tax Act ("the Act") means a voluntary transfer of property without valuable consideration to the donor. Proposed amendments to the Act will allow the Canada Revenue Agency to recognize a gift, for tax purposes, in certain circumstances where a donor has received consideration for property transferred to a charity or other qualifying donee after December 20, 2002.
Pursuant to draft subsection 248(30) of the Act, the eligible amount of a gift is the excess of the fair market value of the property transferred to a charity over the amount of the advantage provided in respect of the gift. Draft subsection 248(31) of the Act provides that the amount of the advantage is generally the total value of any property, service, compensation or other benefit received or obtained by the donor or a person that does not deal at arm's length with the donor. Draft paragraph 248(32)(a) of the Act provides that the existence of an advantage in respect of a transfer of property will not, in and of itself, disqualify the transfer from being a gift, in circumstances where the amount of the advantage is not more than 80% of the fair market value of the property transferred.
Any advantage received or obtained by a donor (or any person not dealing at arm's length to the donor) must be clearly identified and its value ascertainable, if a donation receipt is to be issued to the donor for an eligible amount of a gift. Where the value of the advantage received by the donor is not more than 80% of the fair market value of the property donated, as noted above, the donor will be viewed as having made a gift to the charity equal to the excess of the fair market value of the property transferred to the charity over the amount of the advantage provided.
While it may or may not be relevant to your specific situation, we would draw your attention to the proposed amendments to the Act announced by the Department of Finance in its news release 2003-061 dated December 5, 2003.
We trust that our comments will be of assistance to you. However, as stated in paragraph 22 of Information Circular 70-6R5, this opinion is not a ruling and consequently is not binding on the CCRA in respect of any particular situation.
Yours truly,
F. Lee Workman
Manager
Financial Institutions Section
Financial Industries Division
Income Tax Rulings Directorate
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