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:
Whether airmiles and other premium points may be donated pursuant to 110.1 or 118.1 and how are such points valued.
Position:
Airmiles and other premium points may be the subject of a donation and a registered charity may issue a receipt for such a gift provided the airmiles or points may be transferred to the charity and the value of the airmiles or points may be determined. The receipt must reflect the fair market value of the airmiles or points at the time the donation is made to the charity and the valuation is question of fact in each case.
Reasons:
The term "property" is broadly defined in the Act to include a right of any kind whatever. Since credits earned under an awards program give the individual a right to redeem the credits for certain benefits under the program, it is our view that the credits consitute property and can be the subject of a gift. Regulation 3501(1)(h)(ii).
XXXXXXXXXX 2001-008873
September 17, 2001
Dear XXXXXXXXXX:
Re: Donations of Premium Points
This is in reply to your letter of June 13, 2001 wherein you requested our views with respect to donations of premium points ( such as airmile, credit, and reward programs) pursuant to sections 110.1 and 118.1 of the Income Tax Act ("Act") in the circumstances described in your letter.
The particular circumstances described in your letter appear to be a factual situation involving specific taxpayers. As explained in Information Circular 70-6R4 dated January 29, 2001, it is not this Directorate's practice to comment on proposed transactions involving specific taxpayers other than in the form of an income tax ruling. Should your situation involve specific taxpayers and completed transactions, you should submit all relevant facts and documentation to the appropriate Tax Services Office for their views. However, we can offer the following general comments which may be of assistance.
As you know, the Agency's views concerning charitable gifts are outlined in Interpretation Bulletin IT-110R3. In order to qualify as a charitable donation, there must be a true gift at common law. 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 term "property" is broadly defined in subsection 248(1) of the Act to include a right of any kind whatever. Since premium points earned by an individual under a reward program give the individual a right to redeem the credits for airfare, merchandise or other benefits, it is our view that the premium points constitute property and therefore can be the subject of a gift provided that the premium points can be transferred to the registered charity and their value can be reasonably estimated.
A registered charity is not permitted under the Act to issue a donation receipt where it cannot reasonably determine the value of the gift nor can it issue a receipt for more than the fair market value of the property it received. Subparagraph 3501(1)(h)(ii) of the Income Tax Regulations provides that the official receipt in respect of a gift of property other than cash must contain "the amount that is the fair market value of the property at the time that the gift was made". For greater clarification, the gift made is the points and not air travel or the potential of obtaining air travel tickets or other benefits. Based on informal discussions with Valuation Services of our Compliance Program Branch, the valuation of premium points is a question of fact. Assuming that the points would be transferable to a charity, the fair market value at that time could not be determined due to the fact that at that time there is no ticket or other benefit to put a value on. Since the Act requires that an official receipt be issued at the time the gift is made, the fair market value of such gift at that time would be problematic and would result in a nominal amount if it could be reasonably determined.
Paragraph 149.1(12)(b) of the Act provides that a registered charity must generally include in computing its income for a taxation year all gifts received by it in the year. Accordingly, the charity must include the value of the premium points donated to it in computing its income. In addition, where the registered charity has issued official tax receipts for the credits, pursuant to the disbursement quota rules in section 149.1 of the Act, 80% of the total of all amounts receipted in respect of the premium points must also be included in the charity's disbursement quota calculation.
We hope that our comments will be of assistance.
Yours truly,
F. Lee Workman
Manager
Financial Institutions Section
Financial Industries Division
Income Tax Rulings Directorate
Policy and Legislation Branch
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