CRA considers that a gift by will of a capital interest in a charitable remainder trust can be claimed only by the GRE, not the deceased

CRA confirmed that where an individual has by will made a gift to a qualified donee of the capital interest in a charitable remainder trust (“CRT”), such capital interest is not considered for purposes of s. 118.1(5.1) to have been acquired by the graduated rate estate (“GRE”) on or as a consequence of the individual's death, so that s. 118.1(5.1) is unavailable to permit a donation credit to be claimed in the T1 return of the deceased for the year of death or the preceding year, and so that it is only the GRE which will be able to claim such credit for the taxation year in which the gift is in fact made or for any of the five subsequent taxation years.

In this regard, CRA noted that s. 118.1(5.1) requires that “the subject matter of the gift is property that was acquired by the estate on and as a consequence of the individual's death or is property that was substituted for that property,” and then stated:

A capital interest in a CRT provided by will is created after the taxpayer's death, and after the GRE has acquired the deceased's property as a consequence of the death. The CRT acquires the property from the GRE while the subject of the gift to the qualified donee is a capital interest in the CRT.

The capital interest in the CRT is not an asset acquired by the GRE, nor is it an asset substituted for one or more assets acquired by the GRE.

Neal Armstrong. Summary of 7 October 2022 APFF Financial Strategies and Instruments Roundtable, Q.9 under s. 118.1(5.1) and s. 118.1(5)(b).