21 February 2001 External T.I. 2000-0053175 - Donation receipts - Sponsors

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 or not a particular contribution is a charitable donation.

Position: It depends on whether a benefit is provided to the contributor.

Reasons: The meaning of a gift.

XXXXXXXXXX 2000-005317

February 21, 2001

Dear XXXXXXXXXX:

Re: Charitable Donations

This is in reply to your letter dated October 24, 2000 wherein you requested our views as to whether or not an official receipt as defined in section 3500 of the Income Tax Regulations ("Regulations") could be issued under certain circumstances pursuant to sections 110.1 and 118.1 of the Income Tax Act.

The particular circumstances in your letter on which you have asked for our views 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 advance 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 are prepared to offer the following general comments which may be of assistance.

A 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, 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 payor would cause the transfer to lose its status as a gift. Further, in order for an expenditure 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 it wishes.

Where an individual or a corporate donor transfers property to a "qualified donee", within the meaning of that term in subsection 149.1(1) of the Income Tax Act, the fact that the qualified donee will publish the name of the donors in a newspaper would generally not be considered a benefit that would result in the donation not constituting a gift for purposes of sections 110.1 and 118.1 of the Income Tax Act.

However, if the donor is entitled to free advertising in the newspaper in return for the contribution to the qualified donee this would constitute a benefit that would result in the contribution not qualifying as a gift for purposes of sections 110.1 and 118.1 of the Income Tax Act.

The fact that a corporate donor might be able to otherwise write-off the expenditure as an advertising expense is not relevant to the determination of whether the expenditure would constitute a gift for purposes of sections 110.1 and 118.1 of the Income Tax Act.

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