7 August 1990 Income Tax Severed Letter - Gifts

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.

Dear Sirs:

This is in reply to your letter of July 23, 1990, concerning your request for a ruling. You seek our views as to XXX As advanced income tax rulings are only given in respect of proposed transactions subject to the guidelines in Information Circular IC 70-6R [Information Circular 70-6R] (a copy is enclosed for your information), we can only provide you with some general comments.

XXX

Our Comments

A gift is a voluntary and gratuitous transfer of real or personal property without consideration. No right, privilege, material benefit or advantage may accrue to the donor or to the person designated by the donor. In order for the “gift” to qualify as a charitable donation, it must be made entirely separate and unrelated to any subsequent use. Decisions regarding specific beneficiaries of its established programs must be the exclusive responsibility of the charity.

In determining whether the XXX should issue a receipt in respect of a contribution by an individual staff member, the following guidelines should be considered:

• • Amounts should be paid to the XXX and must be unconditional.
• • Any designated purpose should be part of the general activities of the XXX for which donations would normally be accepted.
• • Generally, individuals who have made such contributions and who wish to propose that XXX funds be expended on particular activities should submit applications for funds or equipment to a committee responsible for administering such funds or equipment for the particular activities.
• • Such an application should adequately document the proposed use of the funds or equipment.
• • Funds or equipment should only be allocated to the individual or his department after applying the standard evaluation criteria for such allocation.
• • Any equipment purchased or expenditures made with contributed funds must be of such a nature that it would be reasonable for the XXX to acquire such equipment or expend such funds and the usual controls with respect to the use of XXX equipment or expenditure of XXX funds should be in force.
• • There can be no direct connection between the amount of the individual's contribution and disbursement from the fund or allocations of equipment to that person, nor should there be any option to purchase equipment acquired with the funds at the end of a certain time period.

As is evident from these remarks, for the contribution by a staff member to be a “gift” for income tax purposes, it is important that the contribution not be dependant upon the subsequent acquisition of equipment for the use of the staff member. Whether two transactions are dependant upon each other is a question of fact. XXX

We trust our comments are of assistance.