19 December 1991 External T.I. 9131785 F - Gift and Disbursement Quota

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.

5-913178

Dear Sirs:

Re:  Subsections 149.1(1)(e) and 149.1(12) of the Income Tax Act

We are writing in reply to your letter of November 7, 1991 in which you requested a technical interpretation of the above-noted provisions.

24(1)

Based on this scenario, you have posed the following questions:

24(1)

1)     By virtue of clause 149.1(1)(e)(i)(A), a "gift of capital received by way of bequest or inheritance" is excluded from the "disbursement quota" of a charitable foundation.  Is there a distinction, for purposes of this paragraph, between funds received out of the capital of an estate and funds received out of the income of an estate?

2)     If the residual income received from the estate is not excluded from the disbursement quota by virtue of the paragraph referred to in the previous question, would the amount be excluded in any event by virtue of the fact that a charitable donation receipt has not been issued to the estate?

3)     Again, assuming that the residual income is not considered "a gift of capital by way of bequest or inheritance", would the amount be excluded from the income of the foundation under clause 149.1(12)(b)(ii)(A)?  

Our Comments

It appears that your queries relate to an actual situation which should, according to Information Circular 70-6R2, be the subject of an advance income tax ruling request.  We are, however, prepared to provide the following general comments in response to your queries.

1)     The "capital" referred to in "gift of capital received by way of bequest or inheritance" in clause 149.1(1)(e)(i)(A) means  "capital" as opposed to "income" and should not be interpreted broadly to include all sources of funding received by way of bequest or inheritance.

2)     Subparagraph 149.1(1)(e)(i) includes in the "disbursement quota" of a charitable foundation "80% of the aggregate of all amounts each of which is the amount of a gift for which the foundation issued a receipt described in paragraph 110.1(1)(a) or 118.1(1)(a) in its immediately preceding taxation year".  Accordingly, by virtue of subparagraph 149.1(1)(e)(i) gifts received for which no receipt was issued as described in paragraph 110.1(1)(a) or 118.1(1)(a) are not included in the "disbursement quota".

3)     Clause 149.1(12)(b)(ii)(A) states that "there shall be included in income of a charity for a taxation year all gifts received in the year including gifts from any other charity but not including any gift or portion of a gift in respect of which it is established that the donor is not a charity and has not been allowed a deduction under paragraph 110.1(1)(a) in computing his taxable income or under subsection 118.1(3) in computing his tax payable under this Part". 

Where no deduction has been allowed under paragraph 110.1(1)(a) or subsection 118.1(3) to the donor of a gift because no receipt had been issued, this clause would exclude the gift from income of the recipient charity.

We trust that these comments will be of assistance.

Yours truly,E. Wheeler for DirectorBusiness and General DivisionRulings DirectorateLegislative and Intergovernmental Affairs Branch

c.c. Director Charities Division