Section 118.1

Subsection 118.1(1) - Definitions

Right to Receive Production

Articles(1)

Total Charitable Gifts

Cases(17)

Subsection 118.1(1) - Definitions

Right to Receive Production

Articles

R. Ashton, "Leasing: Recent Developments", 1997 Corporate Management Tax Conference Report, c. 11.

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Tax Topics - Income Tax Act - Section 16.1 - Subsection 16.1(1)		0
Tax Topics - Income Tax Act - Section 181 - Subsection 181(3)		0

Total Charitable Gifts

Cases

Van der Steen v. Canada, 2020 FCA 168

lack of donative intent for an alleged donation

The taxpayer, a lawyer, withdrew $100,000 from his RRSP and “contributed” an amount exceeding the withdrawal amount (and well in excess of the net withdrawal amount after giving effect to source deductions) to a registered charity (CLES). CRA alleged that under the arrangement the taxpayer was to receive a kickback of a substantial portion of the donation from CLESy. Webb JA confirmed the Tax Court’s finding that the taxpayer had failed to establish his donative intent, so that he was not entitled to charitable credits for his “donation.”

He went on to note that, but for receiving charitable tax credits, the withdrawal and “donation” would have resulted in only a small amount being retained by the taxpayer, and further stated (at para. 44):

It also does not seem logical that Mr. van der Steen would withdraw a significant percentage from his RRSP … and give it to an organization about which he knew very little. There was also no satisfactory explanation of why, if [he] … simply wanted to withdraw money from his RRSP and donate it to a registered charity, he donated it all to this particular charity.

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Tax Topics - General Concepts - Onus	taxpayer failed to meet onus of establishing donative intent	191

Morrison v. Canada, 2020 FCA 93

taxpayers failed to demonstrate on balance that they had acquired the donated property

The taxpayers in a charitable gift program for the donation by them of entitlements to pharmaceuticals (acquired in a distant land) to a registered charity lacked any significant evidence that they had indeed acquired beneficial ownership of the supposedly-donated pharmaceuticals. Although they had pled that they had acquired the pharmaceuticals, this was also a pleaded assumption of the Minister in her reply.

One of the taxpayers (through counsel) argued that “he only had to raise a prima facie case, which he submitted was a lower standard than the balance of probabilities” whereupon the onus of proof shifted to the Minister (para. 45).

After noting that in Sarmadi, he had concluded that “[i]f the taxpayer has, on the balance of probabilities, disproven the particular facts assumed by the Minister, …there is no burden to shift to the Minister to disprove what the Tax Court judge has determined that the taxpayer has proven,” Webb JA concluded (at para. 52):

[B]ecause Mr. Eisbrenner pled that he had acquired ownership of certain pharmaceuticals and transferred these pharmaceuticals to the in-kind charity, he had the onus of proving that he owned these particular pharmaceuticals on a balance of probabilities.

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Tax Topics - General Concepts - Onus	onus of proof rested at all times with the taxpayer	271

Markou v. Canada, 2019 FCA 299

Quebec and ROC donations have similar requirements for a donative (impoverishing) intent

In affirming the Tax Court’s denial of all of their claimed donation credits (including the cash portion - which was at issue in the appeal) Noël CJ stated (at paras. 48-51):

Maréchaux FCA… held that the contractual arrangements pursuant to which the appellants made their alleged gifts cannot give rise to a split gift as the two portions are inextricably tied.

This conclusion … necessarily flows from section 2.2 of the loan agreements which made each of the appellants’ entire donation conditional on the loan being approved by the lender … . As a result, the participants envisaged making only one gift. It is in that context that their donative intent must be assessed.

[T]he Tax Court judge was also bound to hold that “no part of [the interconnected transaction] can be considered a gift that the appellant[s] gave in the expectation of no return” … .

It follows that there was no gift whether the matter is considered from a common law or a civil law perspective. …

In response to a further submission that “it is possible to make a ‘“profitable” gift’ due to the favourable tax consequences that some gifts provide” (para. 54), Noël CJ stated (at para 60):

[T]the fact that a tax benefit is received as a result of making a gift cannot, in and of itself, invalidate the gift as to hold otherwise would mean that Parliament would have spoken in vain in providing for tax benefits consequential on making qualified gifts. However, where a person anticipates receiving tax benefits that exceed the amount or value of an alleged gift, the donative intent is necessarily lacking. Impoverishment being an essential element of a gift under both the civil law and the common law, the purported gift constituted by the cash contribution would fail on this account as well… .

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Tax Topics - General Concepts - Stare Decisis	consent judgments had no precedential value	136

French v. Canada, 2016 FCA 64

Parliament may have intended what constitutes a gift outside Quebec to be partly informed by the Civil Code

In his 2000 to 2002 taxation years, the taxpayer made gifts to a registered charity that were funded from personal funds and from loans tied to the gifts. His Notice of Appeal stated that had he been a resident of Quebec, he would have been entitled to a deduction under s. 118.1 respecting the cash portion of the gifts given that the Civil Code recognized split gifts, i.e., that gifts could be made even where consideration was received, and that “Parliament did not intend for section 118.1…to produce radically different results for taxpayers in Québec that would not apply to taxpayers in the rest of Canada.” In reversing a decision of the Tax Court to strike these pleadings, Noël JA stated (at para. 42) that “it cannot be said with certainty that the meaning of ‘gift’ prior to the [December] 2002 amendments excluded the notion of split gift in the common law provinces,” and then stated (at para. 44):

[T]he appellant does not invoke uniformity for the sake of uniformity. The appellant’s plea is based on the broader proposition that Parliament intended to recognize split gifts, wherever made, in line with the civil law. Given that it would have been open to Parliament to attribute to the word gift a meaning which coincides with the civil law and that it is arguable that this is what Parliament intended, there is no basis for striking the appellant’s plea at this stage… .

Words and Phrases

gift

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Tax Topics - Statutory Interpretation - Interpretation Act - Section 8.1	Parliament may have intended what constitutes a gift outside Quebec to be partly informed by the Civil Code	173

Canada v. Castro, 2015 DTC 5113 [at at 6266], 2015 FCA 225, rev'g sub nom. David v. The Queen, 2014 DTC 1111 [at 3236], 2014 TCC 117

inflated charitable receipt not a "benefit" vitiating a gift (donative intent issue not properly raised)

rev'g on other grounds sub nom. David v. The Queen, 2014 DTC 1111 [at 3236], 2014 TCC 117

The taxpayers received charitable receipts for 10 times the amount of contributions, paid in cash, made by them to a registered charity. Woods J had allowed charitable credits for the amount of the cash donations made (see summary sub nom David).

Before allowing the Minister's appeal on the basis that the receipts were not in prescribed form (see summary under s. 118.1(2)), Scott JA dismissed the Minister's alternative argument that the inflated charitable receipt was itself a benefit that could vitiate a charitable gift. He stated (at para. 47):

...[T]he respondents were not involved in a leveraged charitable donation scheme in which their cash donations were connected to pretence documents as in Berg or a kickback of part of the donation as in Webb. ...

The trial judge was reasonable in refusing, on procedural grounds, to consider the Minister's position that the taxpayers lacked donative intent (paras. 37-39).

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Tax Topics - Income Tax Act - Section 118.1 - Subsection 118.1(2)	inflated charitable receipt was invalid	193
Tax Topics - Income Tax Act - Section 248 - Subsection 248(32)	inflated charitable receipt not an "advantage"	124
Tax Topics - Income Tax Regulations - Regulation 3501	inflated charitable receipt was invalid	193
Tax Topics - Statutory Interpretation - Interpretation Act - Section 16	Regs read in context of enabling legislation	82
Tax Topics - Statutory Interpretation - Interpretation Act - Section 32	inflated charitable receipt not an "advantage"	124

Canada v. Berg, 2014 DTC 5028 [at at 6664], 2014 FCA 25, rev'g infra

intent to be enriched from tax credits

The taxpayer purchased timeshare units for cash equaling their fair market value and issued bogus promissory notes for nine times the units' fair market value as purported additional consideration for the units. He then donated the units to a registered charity and received charitable receipts for 10 times the units' fair market value.

In rejecting a submission that the taxpayer was entitled to credits for the cash portion of his "gift," on the basis that he received no benefit under this "deal" other than the charitable receipts, Near JA stated (at para. 28):

[I]t was not open to the judge to conclude that the pretence documents were "of no value" at the time that Mr. Berg consummated the "deal." ... He used them to support his initial claim for inflated tax credits.

Furthermore, the taxpayer did not have the requisite donative intent, as he "did not intend to impoverish himself by transferring the timeshare units" but instead "intended to enrich himself ... from inflated tax credit claims" (para. 29).

Kossow v. Canada, 2014 DTC 5017 [at at 6622], 2013 FCA 283

Maréchaux principle applies to benefits from third parties

The taxpayer participated in an avoidance scheme similar to the one in Maréchaux, in which she made donations, financed as to 80% by a non-interest-bearing loan with a term of 25 years received from one of the promoters ("Talisker"), in order to obtain tax credits greater than her cash outlay (of 20% of her reported gift amount). The evidence indicated that virtually all of the cash portion of her donation was indirectly used to pay fees, and that the 80% financing received from Talisker was used, through a series of transactions, to in turn finance Talisker. There was no evidence that the art works, which supposedly were to be purchased for a charity with the donated funds, actually existed.

In finding no "gift," as the taxpayer had received a significant financial benefit as the recipient of long-term, interest-free loans as part of the same transactions, Near JA stated (at para. 25):

In my view, Maréchaux stands for two propositions, as follows:

(a) a long-term interest-free loan is a significant financial benefit to the lender; and

(b) a benefit received in return for making a gift will vitiate the gift, whether the benefit comes from the donee or another person.

Respecting point (b), Near JA rejected the taxpayer's submission that McNamee v. McNamee, 2011 ONCA 533, established that a gift is only vitiated by the donor's receipt of a benefit if the donee (rather than a third party) provided it.

Maréchaux v. Canada, 2010 DTC 5174 [at at 7315], 2010 FCA 287, aff'g 2009 DTC 1379 [at 2095], 2009 TCC 587

cash portion of a leveraged "donation" is not a gift

The taxpayer agreed in December 2001 to make a $100,000 donation to a charitable foundation, comprising $20,000 of his own funds and $80,000 from a non-interest bearing 20-year loan. He spent a further $10,000 of his own funds on a "security deposit" together with an insurance policy to ensure against the risk that the security deposit would not accrete to $80,000 in 20 years' time. In January, 2002, the taxpayer assigned the security deposit and the insurance policy to the lender (who was owned by the tax shelter promoter) in complete satisfaction of the $80,000 loan.

Evans JA found that the donation was not a gift, given the Tax Court finding that the $80,000 interest-free loan was a significant benefit that the taxpayer obtained only by making the donation. Furthermore, the taxpayer had a reasonable expectation at the time of making the donation that he would be able to assign the security deposit and the insurance policy to the lender in satisfaction of the loan, which represented a further benefit to him. It was irrelevant that the benefits came from a third party.

The Court of Appeal agreed with Woods J.'s further finding that the taxpayer's $20,000 initial outlay was also not a gift. She stated (at TCC para. 49): "There is just one interconnected transaction here, and no part of it can be considered a gift that the appellant gave in expectation of no return."

Slobodrian v. Canada (Minister of National Revenue), 2006 DTC 5625, 2005 FCA 336

The Court followed its earlier decision in Slobodrian v. Queen, 2003 DTC 5632, 2003 FCA 350 in finding (at p. 5626) that "the mere supply of services without compensation involves no property and hence cannot form the subject matter of a gift".

Canada v. Doubinin, 2005 DTC 5624, 2005 FCA 298

A finding of the Tax Court Judge that the taxpayer had not made a gift of $6,887 to a registered charity with an expectation that he would be issued a tax receipt for $27,548, but that this was a mere possibility, was not made in a capricious manner or without regard to the evidence and, accordingly, the donation made by the taxpayer qualified as a gift.

Canada (Attorney General) v. Nash, 2005 DTC 5696, 2005 FCA 386

error to treat purchased prints as having higher FMV than cost based on retail market

A company ("CVI") operated a program through which it sold groups of limited edition prints to individuals, arranged for appraisal and located registered charities to whom the prints could be donated on behalf of the individuals.

The Court found that the Tax Court Judge had committed two errors: in accepting valuation evidence based on the retail market for individual prints when there was a normal market (that through which CVI actually purchased the prints) for the groups of prints the valuator was required to value; and in finding that the fair market value of the property was approximately three times the amount paid for the property by CVI with no credible explanation for the apparent three-fold increase.

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Tax Topics - General Concepts - Fair Market Value - Other	purchase price of prints established their FMV as contrasted to speculative retail value	316

Slobodrian v. Canada (Minister of National Revenue), 2003 DTC 5632, 2003 FCA 350

A retired physics professor who agreed to carry out research activities without remuneration pursuant to a contract between Public Works Canada on behalf of the Canadian Space Agency, and the University from which he was retired, was not entitled to a charitable credit for the value of the services performed by him. "The word 'gift' ... in a taxing statute must be taken as referring to what is known to the law as a gift, namely the gratuitous transfer of property (tangible or intangible) ..." (p. 5633), and as the statutory definition of property in s. 248(1) did not expand the word property beyond its normal meaning, the mere supply of services without compensation involved no property and, hence, could not form the subject matter of a gift. Furthermore, he did not provide receipts that complied with Regulation 3510.

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Tax Topics - Income Tax Act - Section 248 - Subsection 248(1) - Property	statutory definition of "property" is not broader than its ordinary meaning	57

Woolner v. Canada (Attorney General), 99 DTC 5722 (FCA)

Contributions made by the taxpayers to the First Mennonite Church that were designated as contributions to be applied to a student mutual aid programme did not qualify as a gift (i.e., "a voluntary transfer of property from one person to another gratuitously and not as the result of a contractual obligation without anticipation or expectation of material benefit" (p. 5723)), given that such contributions were made with the anticipation that their children would be provided with a bursary.

The Queen v. Friedberg, 92 DTC 6031, [1992] 1 CTC 1 (FCA)

The taxpayer purchased for $12,000 an antique textile collection which had been identified and brought to his attention by an employee of the Royal Ontario Museum, loaned the collection to the museum, then donated it after a certificate was issued by the Cultural Property Review Board for its appraised value of $229,437. The taxpayer was permitted a deduction for that latter amount under s. 110(1)(b.1). However, the taxpayer was denied a deduction with respect to the alleged donation by him of a second textile collection in a similar series of transactions given that the relevant documents established a direct transfer of title from the original owner of the textile collection to the museum. It was also noted (p. 6034) that if the original owner "had agreed to pass the title to the taxpayer, she would have undoubtedly insisted on a guarantee that the Collection be given to the ROM, which would also have defeated the legal conclusion that there was a gift of the textiles to the ROM from the taxpayer."

In reaching this conclusion, the Court stated (at p. 6032):

[A] gift is a voluntary transfer of property owned by a donor to a donee, in return for which no benefit or consideration flows to the donor.

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Tax Topics - General Concepts - Substance		117
Tax Topics - General Concepts - Tax Avoidance	subjective intention does not alter transactions	156

The Queen v. Burns, 88 DTC 6101, [1988] 1 CTC 201 (FCTD), aff'd 90 DTC 6335 (FCA)

The taxpayer whose daughter was a member of a Canadian Ski Association training squad, was not entitled to deduct payments made by him to the Association because they were not gifts. Pinard, J. found that there was an understanding or arrangement between the taxpayer and the Association that he would pay it certain sums of money and it would allow his daughter to participate in its Training Squad. However, even if there were no contractual obligation on the taxpayer, the taxpayer received a benefit from his contributions in the form of the development and ski training provided for his daughter. In order for there to be a gift "the donor must be aware that he will not receive any compensation other than pure moral benefit."

The Queen v. McBurney, 85 DTC 5433, [1985] 2 CTC 214 (FCA)

In order for a transfer of property to be a "gift", the property generally must be transferred voluntarily and not as the result of a legal obligation, with no advantage of a material character being received by the transferor by way of return. Donations made by the respondent parent to a private school which blended religious teaching with the teaching of secular subjects, were held not to be deductible because they were made out of a "sense of personal obligation on the part of the respondent as a Christian parent to ensure for his children a Christian education and, in return, to pay money to the operating organizations according to their expectations and his means." In addition, the payments fulfilled the respondent's legal obligation under the Education Act (Ontario) to ensure that his children received satisfactory instruction at some school.

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Tax Topics - Income Tax Act - Section 165 - Subsection 165(3)		52

The Queen v. Zandstra, 74 DTC 6416, [1974] CTC 503 (FCTD)

The taxpayer, whose two children were attending at the Canadian Christian School at Jarvis, Ontario (which was a registered charity) paid $590 to the school in 1968, and deducted $390 as a charitable contribution, on the basis that the non-deductible tuition portion of the payment was $200. The Department reassessed on the basis that the tuition component was $200 per child, rather than $200 per family.

The Crown's appeal was allowed. The payments "were not payments made without consideration and cannot therefore be considered 'gifts' ... . [E]ach parent here received a consideration, i.e., the Christian education of his children."

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Tax Topics - Income Tax Act - Section 177 - Subparagraph 177(b)(iv)		162

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Tax Topics - General Concepts - Judicial Comity	principle of judicial comity applicable to previous Tax Court decision on the same donation program	221

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Tax Topics - General Concepts - Fair Market Value - Other	software was to be valued at its purchase price	88

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Tax Topics - General Concepts - Fair Market Value - Other	art work was donated at a FMV equal to its cost rather than appraised value	420

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Tax Topics - General Concepts - Onus	taxpayers had the burden of disproving the Minister’s assumptions about their gift tax shelter about which they knew virtually nothing	438
Tax Topics - General Concepts - Fair Market Value - Other	Ontario list price of generic pharmaceuticals substantially exceeded their FMV in the international market	211

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Tax Topics - Income Tax Act - Section 248 - Subsection 248(30)	donative intent no longer is required for split gifts	296

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Tax Topics - Income Tax Regulations - Regulation 3501 - Subsection 3501(1) - Paragraph 3501(1)(h)	the cash portion of a donation made to a charity was reduced by the fees paid by it to the tax shelter promoter	234
Tax Topics - Income Tax Act - Section 237.1 - Subsection 237.1(1) - Tax Shelter	charitable gifting arrangements with high promised credits was a tax shelter	180

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Tax Topics - Income Tax Act - Section 110.1 - Subsection 110.1(1) - Paragraph 110.1(1)(a)	consideration for "gift" was elimination of obligation to invest the funds	523
Tax Topics - Income Tax Act - Section 18 - Subsection 18(1) - Paragraph 18(1)(a) - Income-Producing Purpose	purpose of payment was to extricate from a regional economic-development obligation rather than to enhance business reputation	224

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Tax Topics - Income Tax Act - Section 143.2 - Subsection 143.2(12)	although borrowing by taxpayers had a term of 9.3 years, they had a reasonable expectation of refinancing with the promoter’s assistance	478
Tax Topics - Income Tax Act - Section 143.2 - Subsection 143.2(7) - Paragraph 143.2(7)(a)	loans were not bona fide in that not handled with commerciality	701
Tax Topics - Income Tax Regulations - Regulation 7000 - Subsection 7000(2) - Paragraph 7000(2)(d)	no requirement to accrue interest on index-linked note in a year when the return thereon was not determinable	605
Tax Topics - Income Tax Act - Section 20 - Subsection 20(1) - Paragraph 20(1)(c) - Subparagraph 20(1)(c)(i)	interest on loan to acquire LP units was deductible as there was a prospect of gross income being allocated by LP in 19 years’ time	619
Tax Topics - Statutory Interpretation - Realization Principle	amount should not be recognized until ascertainable	73
Tax Topics - Income Tax Act - Section 69 - Subsection 69(1) - Paragraph 69(1)(c)	gratuitous transfer is gift irresepctive of absence of benevolent intent	56

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Tax Topics - General Concepts - Fair Market Value - Other	courseware licences valued at modest initial cost, given relevant wholesale market and depressive effect of huge volumes purchased	303
Tax Topics - General Concepts - Ownership	no acquisition of unascertained property	76
Tax Topics - General Concepts - Sham	taxpayer involvement in deceit unnecessary	375
Tax Topics - Income Tax Act - Section 104 - Subsection 104(1)	void for lack of certainty of objects	224
Tax Topics - Income Tax Act - Section 107 - Subsection 107(2)	delegation of power of appointment to promoter not authorized	238
Tax Topics - Income Tax Act - Section 248 - Subsection 248(35)	attempted use of initial gift to step-up ACB under s. 69(1)(c)	262

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Tax Topics - Statutory Interpretation - Interpretation Act - Section 8.1	tax results in common and civil law need not be uniform	143

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Tax Topics - Income Tax Act - Section 248 - Subsection 248(1) - Property	donated space must constitute an enforceable right in order to be property	123

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Tax Topics - Other Legislation/Constitution - Charter (Constitution Act, 1982) - Subsection 15(1)	no charitable registration, no discrimination	47

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Tax Topics - Income Tax Act - Section 237.1 - Subsection 237.1(6)		276

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Tax Topics - Income Tax Act - Section 152 - Subsection 152(4) - Paragraph 152(4)(a) - Subparagraph 152(4)(a)(i)	implausibly large charitable receipts	59

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Tax Topics - General Concepts - Fair Market Value - Other		140

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Tax Topics - Income Tax Act - Section 163 - Subsection 163(2)		38
Tax Topics - Income Tax Act - Section 54 - Personal-Use Property		113
Tax Topics - Statutory Interpretation - Interpretation/Definition Provisions	"includes" is expansive	61

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Tax Topics - Income Tax Act - Section 163 - Subsection 163(2)		158

Administrative Policy

2 April 2024 External T.I. 2024-1005231E5 - Directed gifts - official tax receipts

municipality should have discretion on the spending of funds donated to it

Regarding a situation where a municipality that is a qualified donee issued a press release in which it solicited donations that were redistributed to a specific fund (not part of any program operated by it) for individuals following an unfortunate event, CRA stated:

It is our general view that donations can be receipted by a municipality in Canada on behalf of a program or entity which operates under the authority of the municipality (e.g., a committee established by a municipal bylaw) provided the municipality retains discretion as to how the donated funds are to be spent. If a municipality is merely collecting funds from donors that will simply be redistributed to a person or organization that is not a qualified donee and the latter is legally or otherwise entitled to the property so transferred, the municipality is not in receipt of a gift and cannot issue a donation receipt. In that case, the municipality is merely acting as a conduit for the other person, and it is our view that amounts received by the municipality on behalf of the other person do not qualify as gifts to a municipality … .

7 May 2024 CALU Roundtable Q. 4, 2024-1007061C6 - Shared Ownership & Charitable Gift

CRA confirms its policy in IT-244R3 regarding gifts of a life insurance policy to a charity, but does not articulate any extension of this policy to split dollar arrangements

After referring to the position in IT-244R3 that a gift by an individual of a life insurance policy to a registered charity is considered to be a gift for purposes of s. 118.1 provided that the policy has been absolutely assigned to the donee and the donee has become the registered beneficiary of the policy, CRA stated that “split-dollar” or other shared ownership arrangements are beyond the scope of the CRA's position in IT-244R3. 2003-0004315 indicated that there may be arrangements that could result in a charitable gift for purposes of s.118.1 within the spirit of the split-receipting rules but such a determination can only be made on a case-by-case basis.

10 March 2023 External T.I. 2022-0943881E5 - Charitable Remainder Trusts

gift of remainder interest in CRT is not a gift of the capital property with which the CRT was settled

In somewhat general terms, the numerical limit in the s. 118.1 definition of ”total gifts” as to the amount of an individual’s total charitable gifts for a year that will qualify for credit is increased (under Variable B of the definition) by 25% of the individual’s taxable capital gains for the year in respect of gifts made in the year whose eligible amount is included in the charitable gifts total (so that the normal 75%-of-income limitation is increased in this regard to 100%).

An individual settles a charitable remainder trusts (CRT) with capital property and gifts the remainder interest in the CRT to a qualified donee that is a registered charity, with the eligible amount of such gift being included in the individual’s “total charitable gifts.” CRA indicated that since the gift was of an equitable interest in the CRT and not of the capital property with which the trust had been settled, the taxable capital gain arising on the settlement of the CRT did not increase Variable B.

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Tax Topics - Income Tax Act - Section 118.1 - Subsection 118.1(1) - Total Gifts - Paragraph (a) - Subparagraph (a)(iii) - Variable B	an individual’s taxable capital gain on settling a charitable remainder trust increases the individual’s total gifts limit by 75%, not 100%, thereof	176

1 February 2023 External T.I. 2022-0945221E5 - Directed gift to a municipality

done must have discretion as to use of donated funds for there to be a gift

Regarding the receipt of funds by a qualified donee that is a municipality from a registered charity where such funds would then be directed to a non-qualified donee, being a non-profit organization, CRA, after noting that qualifying disbursement of a charity was defined in s. 149.1(1) to include a gift to a qualified donee, such a municipality in Canada registered by the Minister, stated:

It is our general view that donations can be received and receipted by a qualified donee such as a municipality provided the municipality retains discretion as to how the donated funds are to be spent. If a municipality is merely acting as a conduit, by collecting funds from donors, including a charity, on behalf of an organization that is legally or otherwise entitled to the funds so donated, the municipality is not in receipt of a gift.

Locations of other summaries		Wordcount
Tax Topics - Income Tax Act - Section 149.1 - Subsection 149.1(1) - Qualifying Disbursement	a directed gift is not a gift	146

7 June 2019 STEP Roundtable Q. 2, 2019-0798491C6 - Alter ego trust and donations

payments made to registered charity beneficiaries of a trust can be charitable gifts if the payments made are in the discretion of the trustees

An alter ego trust realizes a taxable capital gain under s. 104(4) on a portfolio of listed shares on the death of the settlor (which generated a deemed year end under s. 104(13.4).).

a) Assume that the residual beneficiary is a registered charity. Can a distribution made to that charity be claimed as a charitable gift?

b) Assume instead that the residual beneficiaries are a class of registered charities as determined by the trustees, the trustees make payments over the next 3 years to various of those charities, and at the end of the 3 years, the remaining capital is to be distributed to registered charities. Can a charitable donation be claimed by the alter ego trust?

(a) After quoting Friedberg (“a gift is a voluntary transfer of property owned by a donor to a donee, in return for which no benefit or consideration flows to the donor,”), CRA indicated that where, as appeared to be the case here, the trust has no discretion as to whether to make the payment to the charity, the payment does not qualify as a gift and thus, is ineligible for the donation tax credit. However, CRA has accepted that where the trustee is clearly given the discretion to decide if the payment is to be made to a charity or to use the funds in some other manner, the payment is considered voluntary and, thus, can qualify as a gift.

(b) Here, in contrast, the fact that the trustee may make payments over the three years suggests that the trustee may have discretion and the payments may be voluntary – so that the payments to the charity over the three years may be eligible for the donation tax credit. However, if there is no discretion as to the distribution of the remaining capital on the third anniversary, such payment would not qualify as a gift.

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Tax Topics - Income Tax Act - Section 118.1 - Subsection 118.1(1) - Total Charitable Gifts - Paragraph (c) - Subparagraph (c)(ii) - Clause (c)(ii)(C)	gifts made by alter ego trust during 3 years following settlor's death	122

2017 Ruling 2016-0628181R3 - Donation of shares to private foundation

residue paid under terms of spousal trust to charitable beneficiary was not a gift

commented on in 2020-0851991C6 F

The estate of B gifts her shares of a portfolio holding company (“Holdco”) to a private foundation, with Holdco thereafter using its liquid assets to redeem the common shares held by the private foundation. The balance of the Holdco shares were held before B’s death in a spousal trust, whose terms in the wills of B’s deceased husband (A) provided that the residue (including such shares) was to be transferred to the Foundation on B’s death. CRA opined that this latter transfer to the Foundation was not a gift by the spousal trust. In its summary, it stated:

The distribution by the spousal trust to the foundation was made in accordance with the terms of the testator’s will and therefore, the spousal trust would not be considered the donor.

Locations of other summaries		Wordcount
Tax Topics - Income Tax Act - Section 118.1 - Subsection 118.1(13) - Paragraph 118.1(13)(c)	gift of NQS in portfolio company cured when company wound-up into charity	210
Tax Topics - Income Tax Act - Section 129 - Subsection 129(1.2)	s. 129(1.2) denies a dividend refund on the wind-up of a private company bequeathed (but not gifted) to a private foundation	264
Tax Topics - Income Tax Act - Section 118.1 - Subsection 118.1(15)	gift of shares (NQS) of portfolio company retroactively deemed to be made in terminal year once company wound up into charity	100

2016 Ruling 2016-0634031R3 - Donation to a municipality

contributions to a legal defence fund of public interest could qualify as charitable contributions by routing them through a municipal-controlled fund

Background

The Municipality (which is a qualified donee) passed a resolution supporting a cause, and has been given full party status with respect to the hearing dealing with the appeal in a particular matter. The Fund was established by two not-for-profit corporations (ACO and BCO) as a collaborative effort to pay for the legal expenses incurred in the defence in [the appeal] respecting the County. Donations to the Fund have been accepted by ACO and BCO. The donations were not tax deductible.

Proposed transactions

The Municipality, ACO and BCO will enter into an agreement to establish the Municipal Fund. The agreement will provide, among other things, that all donations to the Municipal Fund will be deposited to the Municipal Fund bank account set up by the Municipality, the responsibility of ACO and BCO will be to work with a lawyer in facilitating a cost effective process for defending the action, and they may also provide fundraising efforts for the Municipal Fund, the Municipality will at its sole and absolute discretion reimburse expenditures relating to legal expenses and disbursements incurred in defending the action, and when all expenditures are complete any remaining funds in the Municipal Fund will be made available to support activities that in the sole discretion of the Municipality are beneficial to the County’s XX.

The Municipality will use the bank account to reimburse, at its sole discretion, legal invoices and other related expenses to the action and will maintain full control and ownership of the funds as required under the Policy. The lawyer will be retained by ACO and BCO and will not be directly engaged by the Municipality. Both ACO and BCO will submit the legal invoices to the Municipality for reimbursement, at which time the Municipality will have full authority and discretion to reimburse these organizations.

An Individual will donate $XX to the Municipal Fund controlled by the Municipality in respect of which donation the Municipality proposes to issue an official receipt for an eligible amount of $XX. The Individual and persons or partnerships not dealing at arm’s length with the Individual will not receive any benefit or advantage (as defined under s. 248(32)) in respect of the donation to the Fund.

Purpose of proposed transactions

The purpose of the Municipality entering into an agreement to maintain and control the Municipal Fund as a project of community interest is to allow for donations to the Municipal Fund to be eligible as gifts under “total charitable gifts” as defined under subsection 118.1(1).

The purpose of the Individual’s proposed donation is to contribute to the Municipal Fund in order to help offset the legal expenses.

Ruling

Subject to the limitations in s. 118.1 and provided that an official receipt is filed as required under s. 118.1(2), the cash donation made by the Individual to the Municipal Fund will qualify as a gift to the Municipality for purposes of the definition of “total charitable gifts” in s. 118.1(1), and the eligible amount of the gift will be $XX less the amount of the advantage, if any, in respect of the gift as defined in s. 248(32).

S7-F1-C1 - Split-receipting and Deemed Fair Market Value

Meaning of "gift"

1.2 Under the common law, “a gift is a voluntary transfer of property owned by a donor to a donee, in return for which no benefit or consideration flows to the donor” (The Queen v Friedberg, [1992] 1 CTC 1, 92 DTC 6031 (FCA)). Generally, for purposes of sections 110.1 and 118.1, a gift under common law is made if a taxpayer has donative intent, and all three of the following conditions are satisfied:

there must be a voluntary transfer of property to a qualified donee;
the property transferred must be owned by the donor; and
no benefit or consideration must flow to the donor.

1.3 Under the civil law, Article 1806 of the Civil Code of Québec (C.C.Q.) provides that a gift is a contract by which the donor transfers ownership of property to the donee by gratuitous title.

It is generally accepted that a transfer is made by gratuitous title when:

the transfer impoverishes the donor to the benefit of the donee and is made without any corresponding consideration; and
it is the donor's intention to enrich the donee without receiving any corresponding consideration.

The donor’s intention to enrich the donee does not need to involve the full value of the transferred property. Therefore, a transfer of property for partial consideration may result in a gift under the civil law. For example, under the civil law, it is possible to sell a property to a qualified donee at a price below fair market value, resulting in a gift of the difference, if all the other requirements of the civil law are met. Article 1810 of the C.C.Q. also formally recognizes the validity of gifts with partial consideration that are remunerative gifts or gifts with a charge.

Words and Phrases

gift

Locations of other summaries		Wordcount
Tax Topics - Income Tax Act - Section 248 - Subsection 248(30)		112
Tax Topics - Income Tax Act - Section 248 - Subsection 248(32)		1250
Tax Topics - Income Tax Act - Section 248 - Subsection 248(35)		360
Tax Topics - Income Tax Act - Section 248 - Subsection 248(37) - Paragraph 248(37)(e)		105
Tax Topics - Income Tax Act - Section 248 - Subsection 248(37) - Paragraph 248(37)(f)		111
Tax Topics - Income Tax Act - Section 248 - Subsection 248(36)		243
Tax Topics - Income Tax Act - Section 248 - Subsection 248(38)		120
Tax Topics - Income Tax Act - Section 248 - Subsection 248(39)		720
Tax Topics - Income Tax Act - Section 143.2 - Subsection 143.2(1) - Limited-recourse amount		103
Tax Topics - Income Tax Act - Section 248 - Subsection 248(34) - Paragraph 248(34)(a)		166
Tax Topics - Income Tax Act - Section 248 - Subsection 248(41)		158

21 January 2016 Roundtable, 2016-0624851C6 F - Spousal sharing of charitable gifts made by will

gifts made by will of the deceased can no longer be treated as gifts by a surviving spouse

For deaths occurring after 2015, will it be possible to include donations made by the estate of an individual in donations made by the surviving spouse or common-law partner in the particular year or any of the five preceding taxation years? CRA responded (TI translation):

Since proposed clause (c)(i)(C) [of “total charitable gifts”] above does not include a gift made by the estate of a spouse or common-law partner, we are of the view that the total charitable gifts of a surviving spouse or common-law partner for a taxation year or any of the five preceding taxation years, will not include the eligible amount of a gift made by such an estate. Therefore, following these amendments, the administrative practice respecting gifts made in the context of the death of an individual no longer applies for deaths after 2015.

2015 Ruling 2014-0532201R3 - Corporate reorganization

donation and sale-back of public company shares

A privately-held Canadian corporate group uses its shareholdings in a public company to maximize the benefit from a corporate contribution to a charitable foundation established by the spouse of one of their individual shareholders. One of companies in the group is donates its shares to the foundation (claiming the s. 38(a.1) exemption), with the Foundation then immediately selling those shares to another group company for cash. Some related transactions occur in order to utilize the benefit of the s. 110.1 deduction for charitable donations.

Locations of other summaries		Wordcount
Tax Topics - Income Tax Act - Section 38 - Paragraph 38(a.1)	donation of pubco shares to foundation and immediate cash sale to affiliate	521
Tax Topics - Income Tax Act - Section 84 - Subsection 84(3)	cancellation of upstream shareholding on s. 88(1) wind-up	65

30 September 2015 External T.I. 2015-0590501E5 F - Spousal sharing

gift allocation between spouses still permitted after 2015

An individual and his spouse each make a charitable gift of $10,000 in a year, and they wish to allocate $17,000 to the individual as his gift, and $3,000 to his spouse. What is CRA's policy on the allocation of gifts between spouses or common law spouses before 2016 or after 2015? CRA stated (TaxInterpretations translation):

[A]n individual can claim a tax credit for gifts which he, his spouse or common law spouse made in the course of the given year or the five preceding taxation years. Taking into account this administrative position, an individual and his spouse or common law spouse who otherwise satisfies the other conditions stipulated in section 118.1 respecting the income tax credit for a charitable gift for a taxation year can, for years before 2016, choose the most advantageous allocation for purpose of a deduction claim under subsection 118.1(3).

…As for the 2016 taxation year…an individual and his spouse or common law spouse who otherwise satisfies the other conditions stipulated in section 118.1 respecting the income tax credit for a charitable gift could continue to share, in the most advantageous manner, charitable gifts made by each of them, for purposes of a claim under subsection 118.1(3).

…[S]uch an arbitrary allocation of charitable gifts would also be possible for deduction claims for the five taxation years following the given taxation year, insofar as the unused portion of the eligible amount of the gift, as defined in subsection 248(1), is concerned.

12 February 2015 External T.I. 2014-0550771E5 F - Allocation à des bénévoles - chantier particulier

mission work volunteers foregoing allowances

A registered charity sends volunteers on missions to developing countries and pays them an allowance of $X per day. After finding that "remuneration that is quite unrepresentative of the services rendered would not be taxable," CRA turned to a question as to whether the charity could issue donation receipts in accordance with CPC-012 if the volunteers declined the allowance, and stated (TaxInterpretations translation):

[S]uch policy applies only to reimbursement of expenses incurred by the volunteers for the account of the charitable organization and not to allowances which are paid to them.

See summary under s. 5(1).

Words and Phrases

volunteer

Locations of other summaries		Wordcount
Tax Topics - Income Tax Act - Section 3 - Paragraph 3(a) - Business Source/Reasonable Expectation of Profit	modest compensation to volunteers qua independent contractors not income	106
Tax Topics - Income Tax Act - Section 5 - Subsection 5(1)	quite unrepresentative remuneration: exempt	106
Tax Topics - Income Tax Act - Section 6 - Subsection 6(6)	mission work under 2 years in LDCs	109

16 June 2014 STEP Roundtable, 2014-0523061C6 - Trust audit issues

executors lacked power to make gift

In the course of commenting on common audit issues for trusts, CRA stated:

Compliance issues are often encountered [respecting]…gifts by will. … 2012-047216117 dealt with the issue of whether the executors of an estate were empowered to make a gift to charities, and thus claim a deduction pursuant to subsection 118.1(3) in computing the tax payable by the estate. Based on the terms of the will in the particular case, it was our view that the executors did not have the power to make such a gift.

Locations of other summaries		Wordcount
Tax Topics - Income Tax Act - Section 104 - Subsection 104(21)	capital gain distributed to different beneficiary	137
Tax Topics - Income Tax Act - Section 105 - Subsection 105(1)	benefit conferred when trust shares redeemed at undervalue	196
Tax Topics - Income Tax Act - Section 112 - Subsection 112(3.2)	taxpayer stuck with two-transaction form	155
Tax Topics - Income Tax Act - Section 18 - Subsection 18(1) - Paragraph 18(1)(a) - Legal and other Professional Fees	legal and accounting expenses	45
Tax Topics - Income Tax Act - Section 75 - Subsection 75(2)	settlor taking back undervalued freeze shares	76

22 May 2014 External T.I. 2014-0526131E5 - Donation of a fossil

donation of fossil custody

Would the value of the custody of a fossil transferred to a qualified donee can be considered a charitable gift" CRA stated tht this was a legal question on which it would not comment in the absence of further particulars.

27 January 2014 Internal T.I. 2012-0472161I7 - Gifts by Will

gifts. v. distributions made to charities

///?page_id=909#2012-0472161I7">s. 107(2)]: The Deceased had three wills in respect of defined components of her estate, including a second will in respect of the "Secondary Estate." CRA found that the second will did not accord the executors the discretion to make a gift to specified Charities, so that s. 118.1(5) did not deem distributions made to the Charities to have been gifts made by the Deceased. CRA also quoted E9918215 that:

it is a question of fact to be determined based on the specific wording of the will and the intentions of the trustees…whether the payment of amounts to a registered charity by a testamentary trust represent a distribution out of income to a beneficiary of the trust…within the scope of subsection 104(6), or are a charitable donation made by the trust for which a tax credit under subsection 118.1(3) may be claimed by the Estate

and further stated:

even if [the Executors] could make such a gift, pursuant to subsection 248(28)…, any trust [i.e., estate] income payable to the Charities that would be accounted for under section 118.1… as a gift from the Trust could not also be deducted under subsection 104(6)… and vice versa, by the Trust.

Locations of other summaries		Wordcount
Tax Topics - Income Tax Act - Section 107 - Subsection 107(2)	gifts v. distributions made to charities	163
Tax Topics - Income Tax Act - Section 118.1 - Subsection 118.1(5)	gifts. v. distributions made to charities	64

P113 – "Gifts and Income Tax" 2013

Fair market value (FMV)—This is usually the highest dollar value you can get for your property in an open and unrestricted market, between a willing buyer and a willing seller who are acting independently of each other.

Locations of other summaries		Wordcount
Tax Topics - General Concepts - Fair Market Value - Other		42

2012 Ruling 2012-0466731R3 - Donation of flow-through shares

Donors (mostly Canadian-resident individuals) as well as non-donors use cash to subscribe for flow-through shares of a listed Canadian resource company, pursuant to a subscription agreement entered into by a dealer as their agent (the Agent), so that Canadian exploration expenses will be renounced to the subscribers.

The Donors issue directions to the Agent to transfer a portion (the Donated Shares) of their shares to the account of the relevant registered charity, which issues a charitable receipt. Independent persons (the Liquidity Providers) agree to purchase the Donated Shares for their fair market value from the charities. The Liquidity Providers also agree to purchase the balance of the Donors' shares (the Sale Shares) for their fair market value.

The charities receiving Donated Shares will pay a financial services fee to the Agent for its services in selling the Donated Shares to the Liquidity Providers; and Donors who sell Sale Shares will also pay a financial services fee to the Agent for its services in selling those shares to the Liquidity Providers. Mr. X, who is not a Donor, will also sell his shares on the same terms.

Rulings include:

...an amount equal to the fair market value of the Donated Shares will qualify as a gift for the purposes of the definition of "total charitable gifts" in s. 118.1(1) provided an official receipt is filed...

Locations of other summaries		Wordcount
Tax Topics - Income Tax Regulations - Regulation 6202.1 - Subsection 6202.1(1)		252

16 April 2013 External T.I. 2013-0477981E5 F - Interpretation of Gift

ability to opt out of a compulsory contribution to an employer-aligned charity would not necessarily establish a “gift”/Quebec “gift” is CCQ “donation”

A Quebec collective agreement requires each employee to annually pay a specified amount to a pre-established registered charity whose mission supports that of the employer, which also is charitable. In a variation (the second situation), an employee may opt out of the obligatory contribution by written notice. Would these contributions qualify as gifts?

After stating that

what constitutes a “donation” in civil law is a “don” for the purposes of the Act

CRA stated (respecting the first situation):

[T]he employees are subject, by virtue of the collective agreement, to an obligation to remit a predetermined annual amount to the foundation, which prevents the remitted amount from being a donation.

Respecting the option in the second situation:

[This] would not suffice, by itself, to be able to conclude that an employee who had not exercised the option had necessarily made a donation. … [One should] determine the reasons for not having made a written request and … if there was an intention to make a donation.

Words and Phrases

gift don

15 June 2012 External T.I. 2012-0434761E5 F - Dons liés à une police d'assurance-vie

gift if pay policy premiums following assignment of policy to charity, but not by virtue of designating charity as policy beneficiary

Regarding gifts to registered charities by means of a life insurance policy of which the donor is the policyholder and the insured, CRA stated:

[Such] individual … can designate a registered charity as a beneficiary (revocable or irrevocable) of the benefit payable under the policy in the event of death. Such designation does not, however, constitute a gift (or disposition) of an interest in a life insurance policy and the individual is not entitled, at the time the designation is made, to the charitable donations tax credit.

Since the individual remains the holder of the life insurance policy and is responsible for the payment of premiums to the insurer … the payment of the premiums by the individual does not constitute a gift … . However, by virtue of subsections 118.1(5.1) and (5.2), the payment by an insurer to a registered charity following the death of an individual will be deemed to be a gift that the individual made, immediately before the death, to the registered charity, to the extent that all the conditions of subsection 118.1(5.1) are satisfied. …

If, following the assignment [of the policy to the charity], the individual continues to pay the policy premiums directly to the insurance company at the request of the registered charity or with its consent, the individual will be considered to have made a gift qualifying for the charitable donations tax credit, in the same manner as if the individual had donated money to the charity to enable the charity to pay premiums on the assigned life insurance policy.

Locations of other summaries		Wordcount
Tax Topics - Income Tax Act - Section 248 - Subsection 248(31)	donated life insurance policy to be valued on ordinary principles	142
Tax Topics - General Concepts - Fair Market Value - Other	7 factors to be considered in valuing a donated life insurance policy	112

28 November 2010 CTF Roundtable, 2010-0389111C6 - Leveraged Donation Arrangements

CRA will generally not consider advance ruling requests for leveraged donation schemes such as the one considered in Maréchaux. CRA listed conditions under which it would refuse to make a ruling. In addition to five factors present in a Maréchaux-style scheme (essentially amounting to leveraging a donation with "borrowed" funds that do not represent a genuine economic burden on the donor or gain to the charity), the list included:

The funds loaned to the taxpayer circle back to the lender.

The use of a limited partnership or other structure permits losses or other deductions to flow through to investors.

Offshore money managers or investment accounts are used.

There is uncertainty about certain aspects such as valuation and questions of fact such as arm's-length issues.

CPC-012 Out-of-pocket expenses December 3, 1997 (Revised April 28, 2009)

Right of expense reimbursement can be gifted back to the charity

2. A charity can reimburse a volunteer for the expenses incurred on behalf of the charity and later accept the return of the payment as a gift, provided that the amount is returned voluntarily.

3. The parties are encouraged to proceed by way of an exchange of cheques, that is, the charity issues a cheque to the volunteer covering the costs incurred, and the volunteer then writes a cheque to the charity for an equivalent or lesser amount. By using the cheque-exchange method, a charity will have proper financial records justifying the receipt it issues to the volunteer and the volunteer can document that he or she has transferred property to the charity.

4. However, provided the volunteer has a right to reimbursement from the registered charity for the expenses incurred, the charity may treat the right to reimbursement as a non-cash gift and issue a receipt for income tax purposes.

When a registered charity wants to issue a receipt for income tax purposes to a volunteer in lieu of reimbursement, it should have a written direction from the volunteer. The written direction should confirm the right to reimbursement and direct the registered charity to issue a receipt rather than provide reimbursement. The following is an example of acceptable wording for such a direction:

I _______________________ direct that the funds to which I am entitled by way of reimbursement for _______________, and would otherwise be forwarded to me by cash or cheque, be transferred to ______________ as my gift.

If the charity issues a receipt for income tax purposes upon the transfer of a right to reimbursement, it should report the amount of the gift on Form T3010, Registered Charity Information Return both as revenue, and as an expenditure.

5. A charity should also have a policy in place on reimbursing volunteers. The policy should specify both the type of expenditures the charity is prepared to repay (for example, for materials purchased for the use on a charitable activity or for reasonable accommodation if the volunteer is travelling on the charity's business), and appropriate procedures to document the volunteers' payments, such as submitting credit-card slips. Such a policy enables the charity to demonstrate it is controlling the use of its resources for charitable purposes.

29 May 2006 Internal T.I. 2006-0171931I7 F - Medical expense tax credit - XXXXXXXXXX

“donation” to medical clinic which treated taxpayer’s son did not qualify as a charitable gift

The taxpayer, who had been incurring medical expenses for his disabled child, made a donation to a charity, which subsequently paid the fees for the treatment.

The Directorate found that the donation did not qualify as a charitable donation, but that the amount qualified for credit under s. 118.2(2)(a), given that the medical services were provided by or under the supervision of a medical doctor.

Locations of other summaries		Wordcount
Tax Topics - Income Tax Act - Section 118.2 - Subsection 118.2(2) - Paragraph 118.2(2)(a)	“donation” to clinic recharacterized as an eligible medical expense	69

15 March 2005 Internal T.I. 2004-0108721I7 F - Don d'une licence

gift of a non-exclusive software licence was a gift of property

A software developer donated a non-exclusive licence for an unlimited period to a charity that intends to use the software for its charitable purposes. CRA stated:

To the extent that the individual has transferred a licence to use the software to the charity for no consideration, and the charity is not required to return the licence to the individual, it is our view that the non-exclusive licence to use software developed by the individual to a registered charity without a right of return for no consideration is a transfer giving rise to a gift for purposes of the Act.

Locations of other summaries		Wordcount
Tax Topics - Income Tax Act - Section 248 - Subsection 248(1) - Property	excepting WIP, definition of property is no broader than term’s ordinary meaning	75

23 February 2004 External T.I. 2003-0050641E5 F - Fiducie

no particular mortality table required re donation of a residual interest in a trust to a public charitable foundation

In confirming its position that a taxpayer can make a charitable donation of a residual interest in the capital of a trust to a public charitable foundation, CRA stated:

[T]he trust agreement may provide that all of the income will be paid to the donor during the donor's lifetime, or it may provide that only a portion of the income will be paid to the donor during the donor's lifetime, with the balance being added to the capital of the trust or paid annually to the foundation. …

In determining the fair market value of a residual capital interest in a trust, the Agency does not advocate a particular mortality table.

3 December 2003 External T.I. 2003-001859

use of property at no charge not a transfer of property

A person allowing a charity to use office space at no charge would not be viewed as a transfer of property (i.e., a divesting of property by the donor and a vesting of the property in the registered charity) and, accordingly, would not qualify for a credit.

11 September 2003 External T.I. 2003-0029145 F - CREDIT D'IMPOT POUR DON

meaning of gift under Quebec civil law

Also released under document number 2003-00291450.

CCRA noted that Article 1608 of the Civil Code defined a gift as:

Gift is a contract by which a person, the donor, transfers ownership of property by gratuitous title to another person, the donee; a dismemberment of the right of ownership, or any other right held by the person, may also be transferred by gift.

It indicated that whether there was a gift under the relevant provincial law could only be resolved after considering all of the relevant facts.

CPC-017 Gift of Services 29 March 2000

Contributions of services v. repayment to charity of payment for services or expenses

2. Contributions of services, that is, of time, skills or efforts, are not property, and therefore they do not qualify as gifts for purposes of issuing official donation receipts. Accordingly, a charity cannot issue an official donation receipt for services rendered free of charge. However, it may be possible to issue a receipt when a right to reimbursement for any actual expense incurred on behalf of a registered charity has been established. For more information, go to Policy commentary CPC-012, Out-of-pocket expenses.

3. A charity may issue an official donation receipt if a person provides a service to the charity, the charity pays for the service, and the person then returns the payment to the charity as a gift. In such circumstances, two transactions have taken place, the first being the provision of a service and the payment flowing therefrom, and the second being a gift proper.

4. The parties should be advised to proceed by way of an exchange of cheques.

19 December 2000 Internal T.I. 2000-0054467 F - VALEUR DU DON D'UNE POLICE D'ASSURANCE

gift amount of a life insurance policy to be assigned

In rejecting the proposition that the present value of the insured sum for a life insurance policy (rather than its cash surrender value) to be assigned to a registered charity on death can be considered a charitable donation, the Directorate stated:

[T]he proceeds of the life insurance policy never formed part of the deceased's patrimony and, consequently, we cannot consider that there was a gift on his part of an amount equal to the present value of the insured sum.

24 September 1996 External T.I. 9627705 - DONATIONS/TUITION FEES

Unlike teaching or other training, religious training is not viewed as consideration for purposes of the definition of a gift.

13 August 1996 External T.I. 9600615 - TRUE GIFT

"It is the Department's practice to view donations subject to a general direction from the donor as acceptable, provided that no benefit accrues to the donor, the directed gift does not benefit any person not dealing at arm's length with the donor and decisions regarding utilization of the donation within a program rest with the donee."

4 January 1996 External T.I. 9524775 - Donation of Residual Interest

"The gift of an 'object' (within the meaning of 'total cultural gifts' in subsection 118.1(1) and the disposition of an 'object' (within subparagraph 39(1)(a)(i.1)) refers to the gift and disposition of all interests in the object or objects. Consequently, a gift of a residual interest in an object would not be viewed as the gift of an object."

6 July 1995 External T.I. 9503565 - 118.1(1)

"A right to use property (e.g., a helicopter or equipment) for a period of time could be considered a property and a donation of a right to use a property, depending on the facts in a particular case, could be considered a gift in kind. Where it is established on the facts in the case that a donation is a gift in kind, the donor is deemed to have received proceeds of disposition equal to the fair market value of the property donated."

5 October 1994 External T.I. 9421645 - GIFT OF EQUITABLE INTEREST IN A TRUST

Listing of the four requirements that must be met in order for a transfer of property to qualify as a gift.

In valuing an equitable interest in a trust that has been donated, "the general approach is to value the various interests taking into consideration the fair market value of the property itself, the current interest rates, the life expectancy of any live tenants, or current terms of certain tables, and any other factors relevant to this specific case."

Locations of other summaries		Wordcount
Tax Topics - General Concepts - Fair Market Value - Other		13

21 September 1994 External T.I. 5-94149

Although a gift to a pooled fund remainder interest charitable trust could be considered to be a gift to a charity of an equitable interest in the trust provided that there could be no encroachment on capital, in this case it would be very difficult to determine the value of the interest in the trust because the property in the trust consisted of various investments. Accordingly, it was unlikely that a tax credit would be allowed.

13 September 1994 External T.I. 9422275 - CHARITABLE DONATIONS - SPLIT RECEIPTING

"Although gifts directed to a person designated by a donor are not eligible for an income tax receipt, donations made to a Canadian municipality can be subject to a general direction, but only in respect of the particular program in which the donations are to be used. Decisions regarding the utilization of the donations within the program must remain the exclusive responsibility of the municipality.

8 August 1994 External T.I. 9415135 - REIMBURSEMENT OF EXPENSES AS CHARITABLE DONATIONS

The payment by an individual of expenses that she has incurred in performing services for the benefit of the charity does not constitute a gift to the charity even if the individual has voluntarily contributed her time.

25 July 1994 External T.I. 9418505 - CHARITABLE DONATIONS - KOSHER FOOD PRODUCTS

A purchase of kosher-approved products from various retailers does not meet any of the conditions for a charitable gift, i.e., the voluntary transfer of property (usually cash) by a donor to a registered charity with no consideration or benefit accruing to the donor or to anyone designated by the donor as a result of the transfer.

7 June 1994 External T.I. 9405745 - GIFTS OF LIFE INSURANCE POLICIES TO CHARITIES

In response to a question whether a life insurance policy will qualify as a charitable donation where a taxpayer names more than one charity as the beneficiary under the policy, RC stated:

"In order to absolutely assign a life insurance policy, the donor must transfer absolutely, unconditionally and otherwise than as security, all rights, title and interest in the policy. Accordingly, in our view, a life insurance policy cannot be absolutely assigned to more than one registered charity."

19 January 1994 Internal T.I. 9326897 F - Annuities Purchased From Charitable Organizations

Providing a donor makes an irrevocable contribution directly to a registered charity in return for life annuity, it does not matter what steps the charity may take to fund its liability under the annuity.

16 February 1994 Institute of Chartered Accountants of Nova Scotia Roundtable Q. 7, 9401450 - ANNUITIES PURCHASED FROM CHARITABLE ORGANIZATIONS

Where a registered charity has solicited individual contributions of capital to the charity in exchange for immediate guaranteed payments to the individual for life at a specified rate, the charity is not restricted as to the steps it may take to facilitate payment of the annuity. It may purchase an annuity from a recognized annuity issuer, either in the name of the donor or in its own name with a direction to pay in favour of the donor. The amount of the gift to the charity will be equal to the amount, if any, by which the amount of the payment to the charity exceeds the total of the annuity payments expected to be received by the donor pursuant to the life expectancy tables provided in IT-111R.

12 January 1993 T.I. 922833 (November 1993 Access Letter, p. 506, ¶C117-208; Tax Window, No. 28, p. 28, ¶2368)

A gift (i.e., a voluntary transfer of property without consideration and without conditions) is considered to occur where an individual has paid more for an annuity purchased from a charity than the total amounts expected to be received as annuity payments. Where the annuity payments vary with fluctuations in the interest rate, it is not possible to determine the amount of the donation, and the charitable organization is not authorized in these circumstances to issue any receipt.

The comments in IT-111R do not apply where the charitable organization issues a term deposit instead of an annuity to the donor.

14 July 1992 External T.I. 5-921248

A taxpayer will be permitted a credit, on the purchase of an annuity from a charitable organization, based on the difference between the purchase price paid by him and the expected total amounts to be received by him under the annuity.

Locations of other summaries		Wordcount
Tax Topics - Income Tax Act - Section 60 - Paragraph 60(a)		19

24 March 1992 T.I. (March 1993 Access Letter, p. 76, ¶C109-126; Tax Window, No. 18, p. 24, ¶1827)

The irrevocable gift of a covenant which runs with land and is binding on the landowner and his successors in title can qualify as a gift.

12 March 1992 T.I. and 13 March 1992 Memorandum (Tax Window, No. 17, p. 10, ¶1802)

In order for an Indian band council to be recognized as a municipality, the council, at a minimum, must have enacted one valid by-law under section 81 of the Indian Act and one valid by-law under section 83 of the Indian Act.

In order for a gift of land to an Indian band to qualify, it must become part of the "Reserve" pursuant to an Order-in-Council.

9 October 1991 T.I. (C.T.O. Fax Service Doc. No. 233; Tax Window, No. 11, p. 18, ¶1514)

In the case where a "donation" is made to a Canadian municipality with a request that the municipality pass the money on to a community group with which the municipality has little or no active involvement, the payment will not be considered a gift to the municipality if the municipality is merely acting as a conduit in respect of payments received on behalf of the organization.

September 1991 T.I. 1991-92 [FMV excludes GST]

FMV excludes GST

If a corporation or individual donated a work of art to a public cultural institution, does the tax receipt reflect the fair market value plus the original GST paid on the original purchase? CRA responded:

The amount recorded on the receipt does not include the amount of GST paid on the original purchase. In fact, the fair market value of property at a particular point in time does not include any costs incurred by the donor.

26 August 1991 T.I. (Tax Window, No. 8, p. 20, ¶1413)

A surviving spouse may claim a tax credit in the year of death in respect of a gift bequeathed by the will of the deceased spouse, to the extent not previously claimed.

10 April 1991 Memorandum (Tax Window, No. 2, p. 24, ¶1191)

A charitable organization may issue an official receipt for a gift of future breeding rights.

25 February 1991 T.I. (Tax Window, Prelim. No. 3, p. 28, ¶1125)

Where the annuity payment on an annuity purchased from a charitable organization varies with fluctuations in the interest rate, it is impossible to calculate the amount of the gift and no charitable donation receipt may be issued.

88 C.R. - F.Q.2

A premium paid prior to the transfer of a life insurance policy to a charity is not deductible as a charitable donation.

81 C.R. - Q. 38

A taxpayer who transfers property to a trust of which a charity is the capital beneficiary has not thereby made a gift to a charity.

IT-86R "Vow of Perpetual Poverty".

Where an individual agrees that a salary to which he is legally entitled will be paid to a religious institution and he, in return, will receive board, lodging and a small living allowance, the difference between the salary assigned or paid over by him to the religious institution and the value of the board, lodging and living allowance will be treated as a charitable donation.

Locations of other summaries		Wordcount
Tax Topics - Income Tax Act - Section 110 - Subsection 110(2)		0

IT-226R "Gift to a Charity of a Residual Interest in Real Property or an Equitable Interest in a Trust".

Articles

Blake Bromley, "Flaunting and Flouting The Law of Gift: Canada Customs and Revenue Agency's Philanthrophobia", Estates Trusts and Pensions Journal, Vol. 21 No. 3, June 2002, p. 177.

Ghosh, Robson, "Charity and Consideration", British Tax Review, 1993, No. 6, p. 496: Discussion of the concept of no consideration.

Paragraph (c)

Administrative Policy

25 August 2021 External T.I. 2020-0866131E5 - Gifts by Will

carryback to terminal return of gift made by will to a US charity

Will a bequest made by will to a U.S. organization qualify for a charitable donation credit on the individual’s final return?

After noting that

pursuant to ss. 118.1(4.1) and (5), a gift is made pursuant to a will is generally deemed to be made by the deceased individual’s estate (not the individual) at the time the gifted property is transferred to the done
s. 118.1(5.1)(b) applies to a gift (including one by will) made by an individual's graduated rate estate (GRE) if the gifted property was acquired by the GRE on and as a consequence of the death or is property substituted therefor
such a gift can be made within 60 months of an individual’s death by such GRE (or what would be a GRE but for the 36-month limitation)

CRA went on to state:

Pursuant to paragraph (c) of the definition of “total charitable gifts” in subsection 118.1(1) of the Act, the eligible amount of a charitable gift made in a taxation year by a deceased individual’s estate (including a GRE and former GRE) is included as a charitable gift of the estate in the year in which the gift is made. Any unused charitable gifts of the estate can be carried forward to any of the five subsequent taxation years.

Moreover, if a charitable gift is made in a taxation year by an individual’s estate that is a GRE or former GRE where subsection 118.1(5.1) of the Act applies, the eligible amount of the charitable gift can be carried back and included as a charitable gift when computing the donation tax credit for

(a) the last two taxation years of the deceased individual; or

(b) any preceding taxation year of the estate if the estate is the individual’s GRE.

CRA went on to discuss the gift limit in para. (a) of the definition of “total gifts” in ss. 118.1(1) and the limited relief provided for gifts to US organizations under Art. XXI(7) of the Canada-U.S. Convention.

Locations of other summaries		Wordcount
Tax Topics - Treaties - Income Tax Conventions - Article 21	organization exempt under IRC s. 501(c)(3) qualifies under Art. XXI(7) of the Canada-US Convention	324

Subparagraph (c)(i)

Clause (c)(i)(A)

Administrative Policy

5 September 2024 External T.I. 2024-1022711E5 - Donations by a Spouse

an individual can claim unclaimed donations made by her spouse before marriage (going 5 years’ back)

A single individual (the “Donor”) made a gift to a qualified donee in 2017, then married in 2019. The Donor claimed donation tax credits for portions of the eligible amount of that gift for his 2017 through 2022 taxation years, but there were still unclaimed eligible amounts at the end of this carryforward period. The Donor’s spouse wishes to amend her 2019 through 2022 returns to claim the unclaimed portion of the eligible amount.

In confirming the availability of this claim, CRA stated:

It is our general view that, for a particular tax year of individuals who are spouses or common-law partners, either spouse or common-law partner can include, in total charitable gifts, the eligible amount of charitable gifts made by either individual in the particular year or five previous tax years, even though the spousal/common-law relationship did not exist in one or more of those five previous tax years.

Locations of other summaries		Wordcount
Tax Topics - Income Tax Act - Section 152 - Subsection 152(4.2)	s. 152(4.2) can be utilized where the individual was not aware of, or missed claiming a deduction or a credit	199
Tax Topics - Income Tax Act - Section 251 - Subsection 251(6) - Paragraph 251(6)(b)	spousal status tested at the time that spouse used her husband’s unclaimed donations	51

23 January 2024 External T.I. 2023-1000021E5 - Total charitable gifts for a particular year

an individual can carry forward unclaimed charitable donations

Can a taxpayer who makes a gift of $400 to a qualified donee in the 2023 taxation year claim a portion of the gift (e.g., $200) in the 2023 taxation year and claim the balance in the 2024 taxation year? CRA responded:

Generally, subsection 118.1(1) of the Act defines an individual's “total charitable gifts” for a particular taxation year as the total of the eligible amount of the individual's gifts made by the individual, or the individual's spouse or common-law partner, in the particular year or any of the five preceding taxation years to qualified donees, such as a registered charity.

[U]nder subsection 118.1(2.1) of the Act, gifts will be considered to have been claimed in determining an individual's charitable donations tax credits in the order in which they were made (i.e., on a “first-in, first-out” basis).

Accordingly … the individual may include charitable gifts made in the five previous taxation years, to the extent such gifts were not included in computing the individual’s charitable donation tax credit of those prior years, and subject to the limits described in section 118.1 of the Act.

Locations of other summaries		Wordcount
Tax Topics - Income Tax Act - Section 118.1 - Subsection 118.1(2.1)	claims made on a FIFO basis	78

6 October 2017 APFF Financial Strategies and Instruments Roundtable Q. 9, 2017-0705231C6 F - Gift of a Life Insurance Policy and Subrogated Own

no guidance on whether designating a charity as a contingent policyholder generates a charitable credit

The will of Mr. Donor provided for a gift of his life insurance policy on the life of his daughter (which was originally intended to be transferred to his daughter, but this became inappropriate) to a private foundation (the “Private Foundation”). This gift was made by his estate (a graduated rate estate) within three years of his death. Could the GRE claim a gift of $500,000 in his terminal return (assuming sufficient income)? If the Private Foundation was currently designated as contingent policyholder, so that on his death there would be an automatic transfer of the policy to it, would a different result obtain?

After finding, under the first alternative, that “the tax credit for charitable gifts could be claimed in Mr. Donor's final return,” CRA stated:

As to whether the gift could be included in the "total charitable gifts" under clause (c)(i)(A) of that definition under subsection 118.1, it would be necessary to determine whether such a transfer would constitute a gift under the applicable private law, and at what point in time any such donation would be made under the applicable private law. This issue is a private law matter in respect of which the CRA will not provide an interpretation.

Locations of other summaries		Wordcount
Tax Topics - Income Tax Act - Section 148 - Subsection 148(7) - Paragraph 148(7)(a)	gain by estate on gift of policy based on cash surrender value	175
Tax Topics - Income Tax Act - Section 118.1 - Subsection 118.1(1) - Total Charitable Gifts - Paragraph (c) - Subparagraph (c)(i) - Clause (c)(i)(C)	claim in terminal return for charitable gift made by estate under individual’s will	430

Clause (c)(i)(C)

Administrative Policy

2 December 2020 External T.I. 2017-0734261E5 - Charitable Remainder Trusts

rule inapplicable to testamentary creation of charitable remainder trust

The terms of a charitable remainder trust (“CRT”), created by the will of the deceased taxpayer to hold property of the deceased received by the graduated rate estate (GRE), provide for all the income earned by the CRT to be paid to the surviving spouse and, on the death of that spouse, for the property to be transferred to a qualified donee. Will s. 118.1(5.1)(b) apply to the gift of the equitable interest in such testamentary trust on the basis that such interest is property that is substituted for the remainder interest in the property owned at the time of death that is received by the GRE on and as a consequence of the death of the individual?

CRA essentially indicated that this question was assuming a form of transaction at a variance with what CRA saw. It responded:

[T]he equitable interest in the CRT is created as a result of the transfer of property to the CRT by the GRE. The gift of the equitable interest in the CRT is considered to have been made to the qualified donee when the property is transferred to the CRT, provided that the equitable interest in the CRT vests with the qualified donee at that time (and all other requirements are met).

Since the equitable interest of the donee arose at the moment of the creation of the trust, CRA did not construe there to be a gift of substituted property by the GRE – so that s. 118.1(5.1)(b) did not apply.

Locations of other summaries		Wordcount
Tax Topics - Income Tax Act - Section 118.1 - Subsection 118.1(5.1) - Paragraph 118.1(5.1)(b)	will-directed formation by a GRE of a charitable remainder trust cannot benefit the deceased’s terminal return under s. 118.1(5.1)(b)	297

8 May 2018 CALU Roundtable Q. 4, 2018-0745851C6 - Timing of donations from an estate

CRA is reviewing its administrative practice that a gift can be claimed in a terminal return before it is made

CRA has stated that a donation tax credit can be claimed on the deceased taxpayer’s final return so long as the registered charity receives a letter from the estate advising of the gift and its value and the registered charity issues a letter to the estate acknowledging the gift and stating that it will accept the gift. Does this longstanding administrative practice continue to apply to gifts made by an estate that arose after 2015 so that a donation tax credit can be claimed on the deceased individual’s final tax return at a time before the property is actually transferred to a qualified donee?

Where the gift (whose amount is known) cannot be completed within the 60-month period (for example, because of litigation) would the CRA’s administrative practice be available to allow a gift to be made beyond the 60-month period such that it would be considered to meet the conditions in s. 118.1(5.1) with regards to the timing of the gift? CRA responded:

The CRA is currently reviewing the administrative practice with respect to the timing of donation claims with respect to the eligible amount of gifts made by GREs or former GREs and claimed on a deceased individual’s final T1 return.

Any such administrative relief will not extend to gifts of property transferred to qualified donees more than 60 months after the individual’s death since these gifts do not meet the conditions of subsection 118.1(5.1). Accordingly, such gifts cannot be claimed on the tax return of the individual for the year of death. Property that is subject of a gift that is transferred to the donee more than 60 months after the date of death can be claimed by the estate in the year the gift is made or in any of the five subsequent years.

24 July 2017 External T.I. 2017-0698191E5 - Gift of securities by executors of a will

estate gift of cash proceeds of s. 70(5) securities can be carried back to terminal return

S. 118.1(5.1)(b) applies to most gifts made by a graduated rate estate of property that was acquired by it on and as a consequence of the deceased’s death “or is property that was substituted for that property.” CRA indicated that this substituted property concept applied where the deceased held appreciated mutual fund units whose cost was stepped up on the death under s. 70(5) and with the executors then determining to sell some of the units and gift the cash proceeds to a registered charity. The significance of this was that the donation credit could be claimed under s. (c)(i)(C) of the definition of “total charitable gifts” in s. 118.1(1) in the deceased’s terminal return, thereby helping to offset some of the tax on the s. 70(5) gain.

Locations of other summaries		Wordcount
Tax Topics - Income Tax Act - Section 118.1 - Subsection 118.1(5) - Paragraph 118.1(5)(b)	an estate gift of sales proceeds of s. 70(5) property can be carried back to the terminal return	173
Tax Topics - Income Tax Act - Section 38 - Paragraph 38(a.1) - Subparagraph 38(a.1)(ii)	s. 38(a.1)(ii) zeroes post-death appreciation on estate-donated shares	229

6 October 2017 APFF Financial Strategies and Instruments Roundtable Q. 9, 2017-0705231C6 F - Gift of a Life Insurance Policy and Subrogated Own

claim in terminal return for charitable gift made by estate under individual’s will

The will of Mr. Donor provided for a gift of his life insurance policy on the life of his daughter (which was originally intended to be transferred to his daughter, but this became inappropriate) to a private foundation (the “Private Foundation”). On his death, the policy had a cash surrender value, adjusted cost basis and fair market value of $200,000, $50,000 and $500,000, respectively. This gift was made by his estate (a graduated rate estate) within three years of his death. Could the GRE claim a gift of $500,000 in his terminal return (assuming sufficient income)?

CRA first noted that the gain on death would be based on the policy's cash surrender value of $200,000. After referencing the three requirements in s. (c)(i)(A) of "total charitable gifts," CRA noted respecting the first condition that “where subsection 118.1(5) applies to a gift, the gift is generally deemed to have been made by the individual's estate at the time the property to which the gift relates is transferred to the qualified done,” and that s. 118.1(4.1) “provides that subsection 118.1(5) applies … to a gift made by the individual’s estate,” and then stated:

If, as you stated, the transfer of ownership of the interest to the Private Foundation was made within three years of the death, subsection 118.1(5.1) would apply because the property that was the subject of the gift (the interest in the policy) was acquired by the estate on and as a consequence of the death. In such circumstances, the eligible amount of the gift could be included in the total charitable gifts for the taxation year of death under clause (c)(i)(C) of the definition of "total charitable gifts" in subsection 118.1(1). Consequently, the tax credit for charitable gifts could be claimed in Mr. Donor's final return.

If the Private Foundation was currently designated as contingent policyholder, so that on his death there would be an automatic transfer of the policy to it, would a different result obtain? Before turning to s. (c)(i)(A), CRA stated:

[T] he eligible amount of this gift could not be included in the total charitable gifts for the taxation year of death under clause (c)(i)(C) of the definition "total charitable gifts" in subsection 118.1(1). Subsection 118.1(5) would not apply because in this situation the gift would not be made by Mr. Donor under his will nor would it be made by his estate and would not be deemed to have been made as a consequence of the death of Mr. Donor by virtue of subsection 118.1(5.2).

Locations of other summaries		Wordcount
Tax Topics - Income Tax Act - Section 148 - Subsection 148(7) - Paragraph 148(7)(a)	gain by estate on gift of policy based on cash surrender value	175
Tax Topics - Income Tax Act - Section 118.1 - Subsection 118.1(1) - Total Charitable Gifts - Paragraph (c) - Subparagraph (c)(i) - Clause (c)(i)(A)	no guidance on whether designating a charity as a contingent policyholder generates a charitable credit	211

Subparagraph (c)(ii)

Administrative Policy

7 October 2016 APFF Financial Strategies and Instruments Roundtable Q. 8, 2016-0651731C6 F - Gift by a Former Graduated Rate Estate

gifts made in Year 5 by a but-for GRE can only be claimed before death or in Years 5 to 10

The condition in s. (c)(ii)(B) of the “total charitable gifts” definition that the trust be a graduated rate estate (GRE) must be tested in the given year, i.e., that in which the gift is claimed rather than that of the gift. Accordingly, a deduction can be made during years 1, 2 or 3 of a GRE for gifts made in years 4 and 5 of an estate which would be a GRE but for the passage of 36 months.

(a) Does CRA agree that nothing in the Act prevents the test of a trust being a GRE for such purposes being applied in the year of deduction of the gift?

(b) If this is not the case, does this mean that the gift made in year 4 or 5 by an estate which would have been a GRE but for the passage of 36 months cannot benefit from the deduction in years 1, 2 or 3 of the GRE?

In responding negatively to Q.(a), CRA stated:

For the purposes of clause (c)(ii)(B) of this definition, the trust must be a GRE at the time the gift is made, not in the year the gift is deducted in computing the tax payable.

In confirming the proposition in Q.(b), CRA referenced s. 118.1(5.1), and then stated:

Assuming that all conditions in the definition of "total charitable gifts" in proposed subsection 118.1(1) are satisfied, a gift made by a former GRE more than 36 months after the individual's death, but within 60 months after the death, can be claimed in the following years:

the taxation year of the individual's death [citing s. (c)(i)(C) of the “total charitable gifts definition”],

the taxation year preceding that of the individual's death [citing s. (c)(i)(C)],

the taxation year of the estate in which it made the gift [citing s. (c)(ii)(A)],

one of the five taxation years of the estate following that in which the gift was made [citing s. (c)(ii)(A).

However, the eligible amount of a gift cannot be included in the "total charitable gifts" of an estate for a preceding taxation year of the estate, namely, for years 1, 2 and 3 in your example.

Locations of other summaries		Wordcount
Tax Topics - Income Tax Act - Section 118.1 - Subsection 118.1(5.1)	qualification of gift made in Year 5 of former GRE	107

29 November 2016 CTF Roundtable Q. 6, 2016-0669661C6 - 84.1 and the Poulin/Turgeon Case

right of GREs to carry forward donations for five years

Under clause (c)(ii)(A) of the definition of total charitable gifts in subsection 118.1(1), can a graduated rate estate, which has made a gift, use the gift in the five years following the donation? In responding affirmatively, CRA stated:

Clause (c)(ii)(A) of the definition of "total charitable gifts" in subsection 118.1(1) applies to the GRE. This has the consequence that the eligible amount of a gift can be included in the calculation of total charitable gifts of a GRE or a former GRE for the taxation year in which the donation is made or in the five taxation years following the donation.

Locations of other summaries		Wordcount
Tax Topics - Income Tax Act - Section 251 - Subsection 251(1) - Paragraph 251(1)(c)	touchstones for accommodation party	184
Tax Topics - Income Tax Act - Section 84.1 - Subsection 84.1(1)	Poulin is consistent with CRA's previous statements on employee buycos	148

Clause (c)(ii)(B)

Administrative Policy

19 April 2017 External T.I. 2016-0625841E5 F - Gift of equitable interest in a trust

(c)(ii)(A) rather than (c)(ii)(B) applies where a GRE charitably donates a capital interest in a charitable residual trust created by will

In order for a charitable gift by a graduated rate estate gift to be included in the total charitable donations of the estate (or the deceased) under (c)(ii)(B) of the definition in s. 118.1(1) of "total charitable gifts," there is a requirement inter alia that s. 118.1(5.1) deems the gift to have been made by the estate. S. 118.1(5.1) references “property that was acquired by the estate on and as a consequence of the death.”

CRA considered that s. 118.1(5.1) does not apply where a GRE donates a capital interest, in a charitable residual trust created by will, to a qualified donee. However, this did not have much significance as:

under (c)(ii)(A) of the [same] Definition, the eligible amount of a gift of an interest in a trust could be included in the computation of the total charitable gifts of the GRE in the taxation year in which the gift is made or in any of the five subsequent taxation years [until claimed].

Locations of other summaries		Wordcount
Tax Topics - Income Tax Act - Section 118.1 - Subsection 118.1(5.1)	s. 118.1(5.1) does not apply where a GRE donates a capital interest in a charitable residual trust created by will	257

Clause (c)(ii)(C)

Administrative Policy

27 January 2020 External T.I. 2019-0799641E5 - Gift by Life Interest Trust

a life interest trust’s “total gifts” made for the death-date year could be included in the eligible gifts made in the (immediate) post-death year

As a result of the death of the beneficiary of a (life-interest) trust described in s. 104(4)(a)(ii.1), the trust’s taxation year ended on the day of death (the “Death-Date Year”) and a new taxation commenced immediately thereafter (the “Post-Death Year”). A life-interest trust (described in s. 104(4)(a)(ii.1)) made a gift of non-depreciable capital property in the taxation year commencing immediately after the beneficiary’s death (the “Post-Death Year”) and prior to the trust’s filing-due date for the taxation year ending with that death (the “Death-Date Year”).

When asked about this, CRA did not seem to be troubled that, although (c)(ii)(C) of “total charitable gifts” in s. 118.1(1) contemplates that a gift made by the trust in the Post-Death Year could be included in the total charitable gifts of the trust in the Death-Date Year, variable B of s. (a)(iii) of “total gifts” in s. 118.1(1) (calculating the numerical maximum for recognized gifts) refers only to the proportion of an individual’s taxable capital gain for a taxation year in respect of a gift made by the individual in the taxation year (e.g., the Death-Date Year). Thus, the trust’s “total gifts” for the Death-Date Year could include the eligible amount of the gift of capital property made in the Post-Death Year.

Locations of other summaries		Wordcount
Tax Topics - Income Tax Act - Section 118.1 - Subsection 118.1(1) - Total Gifts - Paragraph (a) - Subparagraph (a)(iii)	a life interest trust’s “total gifts” for the death-date year could include the eligible amount of the gift of capital property made in the (immediate) post-death year	308

7 June 2019 STEP Roundtable Q. 2, 2019-0798491C6 - Alter ego trust and donations

gifts made by alter ego trust during 3 years following settlor's death

The residual beneficiaries of an alter ego trust are a class of registered charities as determined by the trustees, the trustees make payments over the next 3 years following the settlor’s death to various of those charities, and at the end of the 3 years, the remaining capital is required to be distributed to registered charities. CRA indicated that the payments made during the 3 years likely qualified as gifts, as they were made at the discretion of the trustees – in which case, a donation tax credit could be claimed. However, as there appeared to be no discretion as to whether the amounts were to be paid to charities at the end of the 3 years, those distributions would not qualify as gifts.

Locations of other summaries		Wordcount
Tax Topics - Income Tax Act - Section 118.1 - Subsection 118.1(1) - Total Charitable Gifts	payments made to registered charity beneficiaries of a trust can be charitable gifts if the payments made are in the discretion of the trustees	327

Total Crown Gifts

Administrative Policy

ATR-63, 20 April 1995 "Donations to Agents of the Crown"

In the absence of a specific provision to this effect in an organization's enabling legislation, RC required an opinion from the Deputy Attorney General of the province that the organization was a Crown agent.

Although decisions regarding specific beneficiaries must be the exclusive responsibility of the entity to which the donations are made (in this case, the organization), here "the direction that the donations be used for particular purposes was not binding and was in such general terms that it was clear that the exclusive responsibility regarding the use of the funds remained with the organization".

Locations of other summaries		Wordcount
Tax Topics - Income Tax Act - Section 110.1 - Subsection 110.1(1) - Paragraph 110.1(1)(b)		100

20 January 1995 External T.I. 9500415 - GIFTS TO CROWN AGENTS

Given that s. 53 of the College and Institute Act, R.S.B.C. 1979, c. 53 provided that an institution was for all its purposes an agent of the Crown in right of the Province, a gift to a college designated as a provincial institute under that Act qualified as a gift to the provincial Crown.

Locations of other summaries		Wordcount
Tax Topics - Income Tax Act - Section 110.1 - Subsection 110.1(1) - Paragraph 110.1(1)(b)		58

16 December 1992 Income Tax Severed Letter 923559A F - Crown Gifts to Agent of Her Majesty

A gift to a foundation established under the University Foundation Act (Ontario) qualifies as a gift to an agent of the provincial Crown.

Locations of other summaries		Wordcount
Tax Topics - Income Tax Act - Section 110.1 - Subsection 110.1(1) - Paragraph 110.1(1)(b)		25

Total Cultural Gifts

Cases

Canada v. Malette, 2004 DTC 6415, 2004 FCA 187

It was agreed that the fair market value of 981 individual works of art by a Canadian artist named Harold Feist that the taxpayer donated to the Art Gallery of Algoma was reduced by a "blockage discount" (i.e., the depressive effect on the value of individual items that occurs due to the fact that the number of items offered for sale exceeds the number of willing buyers); and the references to "object" in the singular in the legislation did not establish that a blockage discount must not be applied.

Locations of other summaries		Wordcount
Tax Topics - General Concepts - Fair Market Value - Other		57

Administrative Policy

S4-F14-C1 - Artists and Writers

General discussion

1.84 … A certified cultural property is a property of outstanding significance to Canada, pursuant to paragraph 29(3)(b) of the Cultural Property Export and Import Act, for which a certificate has been issued by the Canadian Cultural Property Export Review Board (CCPERB). The CCPERB will also determine the FMV of the property during the certification process and include this on the certificate issued. To be eligible for the special tax treatment for gifts of certified cultural property, the property must be an object pursuant to the definition of total cultural gifts in subsection 118.1(1). Further, the object must be gifted to an institution or public authority in Canada that is designated under subsection 32(2) of the Cultural Property Export and Import Act at the time the gift is made.

1.85 To claim the special tax treatment available for gifts of certified cultural property, an individual must file the certificate issued by the CCPERB with their tax return for the tax year in which the gift was made. Where an individual is claiming a donation tax credit for the eligible amount of a gift of certified cultural property, they will also need to file the official donation receipt provided to them by the institution or public authority in Canada to which the gift was made. …

1.86 Generally, under the definition of total gifts in subsection 118.1(1), the eligible amount of charitable gifts to qualified donees that can be used in determining an individual’s donation tax credit is limited to 75% of the individual’s net income for the year in which the gift is made. This limit may be increased for gifts of capital property. Gifts of cultural property are not limited to a percentage of income. The eligible amount of charitable gifts made in a tax year can be carried forward and claimed on the individual’s return in any of the next five years.

Locations of other summaries		Wordcount
Tax Topics - General Concepts - Substance		93
Tax Topics - Income Tax Act - Section 5 - Subsection 5(1)		469
Tax Topics - Income Tax Act - Section 3 - Paragraph 3(a) - Business Source/Reasonable Expectation of Profit		582
Tax Topics - Income Tax Act - Section 9 - Nature of Income		298
Tax Topics - Income Tax Act - Section 10 - Subsection 10(6)		272
Tax Topics - Income Tax Act - Section 18 - Subsection 18(1) - Paragraph 18(1)(a) - Income-Producing Purpose		599
Tax Topics - Income Tax Act - Section 8 - Subsection 8(1) - Paragraph 8(1)(p)		573
Tax Topics - Income Tax Act - Section 8 - Subsection 8(1) - Paragraph 8(1)(q)		1067
Tax Topics - Income Tax Act - Section 56 - Subsection 56(3) - Paragraph 56(3)(b)		527
Tax Topics - Income Tax Regulations - Regulation 200 - Subsection 200(2)		103
Tax Topics - Income Tax Act - Section 9 - Capital Gain vs. Profit - Commodities, and commodities futures and derivatives		122
Tax Topics - Income Tax Act - Section 118.1 - Subsection 118.1(7.1)		724

1 March 2001 External T.I. 2001-0071175 F - Don de biens culturels - copropriété

gift of undivided interest in a cultural property to a designated owner co-owner

CCRA indicated that a gift of an undivided interest in cultural property to a designated institution, which became the sole owner of the property with all the rights attaching to ownership of the property would generally be a gift, but that s. 245(2) could be applicable depending on the facts submitted.

1 February 2001 External T.I. 2000-0049655 F - Transfert entre conjoints de crédit d'impôt

credits from gifts of cultural property can be reallocated between spouses, but s. 69 gains cannot be reallocated

Regarding whether an individual who has donated cultural property could transfer the donation credit to their spouse, CCRA confirmed that a gift made by a spouse may be claimed by either spouse regardless of the name of the donor appearing on the receipt – but that gain under s. 69(1)(b)(ii) was required to be recognized only on the basis of the ownership interest in the donated property.

Paragraph (a)

Administrative Policy

11 May 2004 External T.I. 2004-0069521E5 F - Don de biens culturels

no donation of an object where donation of an interest therein

After noting the view in IT-407R4, para. 13, that “a gift of an interest in an object (including a residual interest) is not viewed as the gift of an object,” CRA stated:

[W]here all of a property, including all rights in it, is transferred by way of gift, and the donee is, as a result of the gift, the sole owner of the property with all rights in it, there is a gift of an object for the purposes of subsection 118.1(1) and subparagraph 39(1)(a)(i.1).

Locations of other summaries		Wordcount
Tax Topics - Income Tax Act - Section 248 - Subsection 248(32)	s. 248(32) inapplicable where contract of sale rather than deed of gift	133

Total Ecological Gifts

Administrative Policy

4 March 2014 External T.I. 2013-0513251E5 - Ecogifts

conservation easement must be permanent

Under the Nova Scotia policy of no net loss of wetlands, a consultant may assume a wetland restoration or creation obligation in consideration for the reduction of other wetlands. In discharging this obligation, the consultant may approach landowners respecting the restoration of their lands to wetlands. After any resulting restoration, a conservation easement in favour of the province or a registered charity may be registered on title. Would the landowner be considered to have made a gift?

In the course of a general discussion, CRA stated that it

generally does not recognize temporary transfers of property as gifts… . Accordingly… a conservation interest created for a specified term is not a gift of land within the meaning of an ecological gift in subsection 118.1(1) and paragraph 110.1(1)(d)… .

5 February 1997 External T.I. 9633455 - CONDITIONAL DONATION - WHETHER A GIFT?

The grant of an easement in fulfilment of a pre-condition to subdivision approval would not qualify as a gift.

Total Gifts

Administrative Policy

25 October 1994 Internal T.I. 9423177 - DEDUCTION CHARITABLE DONATIONS

Pursuant to s. 70(2), a deceased taxpayer is considered to be another person whose only income for the year is the value of rights or things as shown on the separate return. Accordingly, for purposes of the determination under the definition of "total gifts", the balance of the deceased taxpayer's income is shown in the other tax return as if he were a different taxpayer having only that income for the year.

Paragraph (a)

Subparagraph (a)(iii)

Administrative Policy

27 January 2020 External T.I. 2019-0799641E5 - Gift by Life Interest Trust

a life interest trust’s “total gifts” for the death-date year could include the eligible amount of the gift of capital property made in the (immediate) post-death year

As a result of the death of the beneficiary of a (life-interest) trust described in s. 104(4)(a)(ii.1), the trust’s taxation year ended on the day of death (the “Death-Date Year”) and a new taxation commenced immediately thereafter (the “Post-Death Year”). The trust made a gift of non-depreciable capital property in the Post-Death Year and prior to the trust’s filing-due date for the Death-Date Year.

The questioner noted that although (c)(ii)(C) of “total charitable gifts” in s. 118.1(1) contemplated that a gift made by the trust in the Post-Death Year could be included in the total charitable gifts of the trust in the Death-Date Year, variable B of s. (a)(iii) of “total gifts” in s. 118.1(1) refers only to the proportion of an individual’s taxable capital gain for a taxation year in respect of a gift made by the individual in the taxation year (e.g., the Death-Date Year).

Does the trust’s “total gifts” for the Death-Date Year includes the eligible amount of the gift of capital property made in the Post-Death Year? CRA stated:

[T]he trust’s total charitable gifts for the Death-Date Year will include the eligible amount of the gift of capital property made by the trust in the Post-Death Year pursuant to clause (c)(ii)(C) … . In addition, the taxable capital gain, if any, in respect of the gift of capital property made by the trust in the Post-Death Year will be included to determine the variable B amount for purposes of computing the trust’s “total gifts” under subsection 118.1(1) of the Act. However, the Variable B amount does not include the taxable capital gain, if any, from the deemed disposition … by the trust in the Death-Date Year resulting from the death of the individual beneficiary.

Locations of other summaries		Wordcount
Tax Topics - Income Tax Act - Section 118.1 - Subsection 118.1(1) - Total Charitable Gifts - Paragraph (c) - Subparagraph (c)(ii) - Clause (c)(ii)(C)	a life interest trust’s “total gifts” made for the death-date year could be included in the eligible gifts made in the (immediate) post-death year	223

Variable B

Administrative Policy

10 March 2023 External T.I. 2022-0943881E5 - Charitable Remainder Trusts

an individual’s taxable capital gain on settling a charitable remainder trust increases the individual’s total gifts limit by 75%, not 100%, thereof

An individual settles a charitable remainder trusts (CRT) with capital property and gifts an equitable interest in the CRT to a qualified donee that is a registered charity, the eligible amount of which is included in the individual’s “total charitable gifts” under s. 118.1(1). Is the individual eligible to include the taxable capital gain, arising from the transfer of the capital property to the CRT, in variable B of the definition of “total gifts”? CRA responded:

[G]iven our longstanding view that the property gifted by the individual to the qualified donee (e.g., the registered charity) is an equitable interest in a CRT (the eligible amount of which is included in the individual’s total charitable gifts), it would follow that the taxable capital gain referred to in Variable B is in respect of the gift of that equitable interest made to the qualified donee. The individual’s taxable capital gain arising from the transfer of the capital property to the CRT would not be included in variable B … .

Locations of other summaries		Wordcount
Tax Topics - Income Tax Act - Section 118.1 - Subsection 118.1(1) - Total Charitable Gifts	gift of remainder interest in CRT is not a gift of the capital property with which the CRT was settled	173

Subsection 118.1(2) - Proof of gift

Cases

Canada v. Castro, 2015 DTC 5113 [at at 6266], 2015 FCA 225, rev'g sub nom. David v. The Queen, 2014 DTC 1111 [at 3236], 2014 TCC 117

inflated charitable receipt was invalid

After finding that the inflated receipt was not - in itself - a benefit that would vitiate a gift (see summary under s. 118.1(1) - total charitable gifts), Scott JA allowed the Minister's appeal on the basis that the receipts did not comply with Reg. 3501(1)(h) as they did not show the amount of the cash gifts and that Reg. 3501(6)(b) applied, which deems a receipt to be spoiled if it incorrectly records the amount of the cash gifts.

Jurisprudence (e.g. Mitchell) that "allowed for some flexibility on the basis that all the information was, in any event, readily available to the Minister" (para. 76) was not applicable, as such information was not so available here and Reg. 3501(6) unambiguously and specifically requires that a receipt accurately record the cash donation (paras. 78-80).

Locations of other summaries		Wordcount
Tax Topics - Income Tax Act - Section 118.1 - Subsection 118.1(1) - Total Charitable Gifts	inflated charitable receipt not a "benefit" vitiating a gift (donative intent issue not properly raised)	175
Tax Topics - Income Tax Act - Section 248 - Subsection 248(32)	inflated charitable receipt not an "advantage"	124
Tax Topics - Income Tax Regulations - Regulation 3501	inflated charitable receipt was invalid	193
Tax Topics - Statutory Interpretation - Interpretation Act - Section 16	Regs read in context of enabling legislation	82
Tax Topics - Statutory Interpretation - Interpretation Act - Section 32	inflated charitable receipt not an "advantage"	124

Administrative Policy

10 February 1993 T.I. (Tax Window, No. 28, p. 20, ¶2419)

Where an individual has made an anonymous gift through an agent, she will not be able to comply with the requirements of Regulations 3501 that the receipt shows her name and address, with the result that no credit will be available.

21 October 1992 T.I. 922450 (September 1993 Access Letter, p. 420, ¶C117-201)

A charitable organization can issue a receipt for the inter vivos gift to it of an equitable interest in a trust, as described in IT-226R, paragraph 3. In the case of property other than real property, the longer the period before full ownership of the property passes to the charity, the more difficult it is to establish the value of the interest.

IT-110R2 "Deductible Gifts and Official Donation Receipts"

Locations of other summaries		Wordcount
Tax Topics - Income Tax Act - Section 110.1 - Subsection 110.1(1) - Paragraph 110.1(1)(a)		0
Tax Topics - Income Tax Regulations - Regulation 3501		0

25 October 89 T.I. (March 1990 Access Letter, ¶1150)

The total charitable gifts made in the year can be utilized before the utilization of cultural gifts from preceding taxation years, and there is no requirement to use up prior years' donations first.

Subsection 118.1(2.1)

Administrative Policy

23 January 2024 External T.I. 2023-1000021E5 - Total charitable gifts for a particular year

claims made on a FIFO basis

CRA confirmed that an individual can choose (under s. 118.1(1) - "total charitable gifts" – (c)(i)(A)) not to claim a charitable donation in a particular year and carry forward the claim for up to five years, subject to the s. 118.1 limitations. For example, under s. 118.1(2.1), gifts will be considered to have been claimed in determining an individual's charitable donations tax credits in the order in which they were made (i.e., on a “first-in, first-out” basis).

Locations of other summaries		Wordcount
Tax Topics - Income Tax Act - Section 118.1 - Subsection 118.1(1) - Total Charitable Gifts - Paragraph (c) - Subparagraph (c)(i) - Clause (c)(i)(A)	an individual can carry forward unclaimed charitable donations	201

Subsection 118.1(3) - Deduction by individuals for gifts

Administrative Policy

24 September 2003 External T.I. 2003-0028145 F - DON FAIT PAR UN PARTICULIER NON-RESIDENT

non-resident can carry forward a credit five years to when Canadian residence is acquired

Also released under document number 2003-00281450.

In essentially confirming that a non-resident individual making a gift in one year when the individual has no source of income in Canada can then claim the gift tax credit in a subsequent year when the individual is resident in Canada and has a source of income, CCRA stated:

Based on the wording of subsection 118.1(3), we believe that there is no obligation to deduct the gift or any part of it in the year in which it was made. Furthermore, subsection 118.1(3) does not restrict the tax credit to an individual resident in Canada.

Subsection 118.1(4) - Gift in year of death

Administrative Policy

31 May 1995 Internal T.I. 9504917 - GIFT BY WILL

Where an executor of an estate or a trustee has a right to encroach on the capital of the estate or trust, no tax credit in respect of a donation of the capital is allowed because the size of the donation cannot reasonably be determined.

Subsection 118.1(5) - Gift by will

Administrative Policy

2 January 2014 Internal T.I. 2013-0490141I7 - Charitable Donations

s. 118.1(5) applied where discretion in gift mechanics

The Will of the "Deceased" provided that half the residue of the Estate was to be transferred to the "Foundation," a registered charity. The primary assets of "Holding" (a majority of whose (Class A) shares were held by the Deceased, and the balance (as Class B shares) were held by his two non-resident children) were marketable securities. After Holdings redeemed the children's Class B shares and issued Class Z common shares to the Estate for a nominal subscription price:

Holding sold its marketable securities (in contradiction to 6 below, described as substantially all its marketable securities) to the Estate for a demand note;
Holdings declared capital and eligible dividends, and satisfied them by issuing demand notes;
Holdings redeemed the Estate's shares;
the Estate sold the Class Z shares to the children;
the Estate apparently gifted demand notes (issued in 2) to the Foundation;
Holding apparently discharged these notes by delivering marketable securities to the Foundation; and
(at some point) the Estate gifted marketable securities (apparently, the ones purchased by it in 1) to the Foundation (and also made a cash donation).

The bequest to the Foundation was partly satisfied by a direct transfer of marketable securities by the Estate, perhaps as described in 7. In rejecting a submission of the executors ("Trustees") that they had "sufficient discretion to decide… how to make that donation" so that it would not qualify as a charitable bequest at the time of death under s. 118.1(5), and so that the Estate could instead claim the donation tax credit under s. 118.1(3), the Directorate quoted from 2001-009020 that a gift by an individual generally will so qualify:

if the terms of his or her will provide for a donation of a specific property, a specific amount or a percentage of the residual of the individual's estate to charity, it is clear from the terms of the will that the trustee is required to make the donation, the estate is able to complete the donation after the payment of its debts, and the donation is made to a qualified donee

and then stated:

Nothing in the terms of the Will provided for any discretionary powers vested in the Trustees to modify this specific bequest.

And in the Supplement further stated:

A gift of the residue or a specified portion of the residue of an estate can be a Gift of Will when the FMV of the subject residue could be reasonably ascertained at the time of death of the deceased.

Respecting the character of the donated notes being non-qualifying securities, the Directorate stated:

Generally, pursuant to paragraph 118.1(13)(c), where the non-qualifying security is disposed of by the donee within 60 months, the donor may be treated as having made the gift (the value of which is deemed pursuant to that paragraph) at this later time. However, it should be noted that by virtue of subsection 118.1(15), in this case, for purposes of section 118.1, the gift shall be deemed to have been made by the Deceased immediately before his death.

Respecting "marketable securities transferred by Holding on behalf of the Estate to the Foundation" (apparently as described in 5 and 6 above), the Directorate stated:

the better view is that…[this] constitutes a gift by will under subsection 118.1(5)… and is deemed to have been made by the Deceased immediately before his death.

Locations of other summaries		Wordcount
Tax Topics - Income Tax Act - Section 118.1 - Subsection 118.1(13)	s. 118.1(5) applied where gift of subsidiary notes satisfied with subsidiary property	192

27 January 2014 Internal T.I. 2012-0472161I7 - Gifts by Will

gifts. v. distributions made to charities

The Deceased had three wills in respect of defined components of her estate, including a second will in respect of the "Secondary Estate." CRA found that the second will did not accord the executors the discretion to make a gift to specified Charities, so that s. 118.1(5) did not deem distributions made to the Charities to have been gifts made by the Deceased.

Locations of other summaries		Wordcount
Tax Topics - Income Tax Act - Section 107 - Subsection 107(2)	gifts v. distributions made to charities	163
Tax Topics - Income Tax Act - Section 118.1 - Subsection 118.1(1) - Total Charitable Gifts	gifts. v. distributions made to charities	211

11 October 2013 APFF Roundtable, 2013-0492791C6 F - Gift by will

potential executor discretion re corporate/estate split of gift might preclude as "gift"

The executors named in a will, who are different than the directors of a corporation of which the testator was the shareholder, are directed in the will to make a gift to a registered charity equal to $100,000 minus all sums given to the charity by the corporation following the death of the testator. In response to a submission that such a gift by the executors would qualify under s. 118.1(5) given that the directors are different from the executors (unlike the facts in 2012-0453131C6 F), CRA stated (TaxInterpretations translation):

[T]he testamentary clause which you submitted leaves a certain discretion to the executor, which would prevent the gift from qualifying as a gift by will. Furthermore, this type of bequest is not a gift of a specific property, of a precise amount, nor a precise percentage of the residue of an estate. In this regard, a gift of a specific property is the gift of property in kind rather than of money.

14 June 2012 External T.I. 2011-0430131E5 - Subsection 118.1(5) - Gift by Will

non-discretion test

Respecting an inquiry as to the situation where a charity does not receive the property donated under the deceased's will (a specified percentage of the residue of the estate) until two years after death, CRA stated:

[A] gift is considered to have been made "by the individual's will" where the executor of the estate is required to transfer a specific property or amount to a recipient that is a qualified donee. An amount is certain, in this regard, if there is no discretion given to the executor as to whether the gift can be made or as to the amount of the gift (e.g., a specific bequest, a gift of residue, or a specified portion of the residue can be a gift by will). A gift, the occurrence or quantum of which is subject to the discretion of an executor, is not a gift by will.

8 October 2010 Roundtable, 2010-0370491C6 F - Don d'actions

gift of shares is not made by will where the number of gifted shares is subject to a tax-reduction direction to be applied in executors’ discretion

Could a gift of shares qualify as a gift by will where the will directs that shares with an unrealized capital gain shall be donated to a registered charity in such numbers as to eliminate the taxes of the deceased, or to only eliminate the deceased's taxes on the capital gain on those shares? After noting that “the will must require the executor … to distribute the bequeathed property to the designated legatee,” CRA stated:

[A] gift the amount of which is left to the discretion of the executor or the deceased's legal representative is not a gift made by will. In addition, where the amount of the gift cannot be determined, no donation deduction will be allowed in respect of the gift.

Words and Phrases

by will

21 March 2007 External T.I. 2005-0142121E5 F - Don au décès d'un contribuable

bequest of shares to spousal trust, with the shares then directed to a registered charity on the spouse’s is treated as a gift of an equitable trust interest by the deceased

Mr. X and Mrs. X are married under the community of property regime. If Mrs. X survives Mr. X and renounces the community, Mr. X's will would provide that all of the Realty Co shares would be transferred to a testamentary spousal trust pursuant to s. 70(6)(b), with the will providing that upon Mrs. X's death, all the shares would be bequeathed to a registered charity. Mr. X's legal representative would opt pursuant to s. 118.1(6) for the adjusted cost base of the Realty Co shares to be the value of the gift.

Who could claim the donation tax credit for the donation, under Mr. X's will, of the Realty Co shares? CRA responded:

As noted in paragraph 4 of IT-226R, In the case of an equitable interest in a trust, the CRA considers a gift to have been made when the transfer of property …( … the shares of Realty Co) to the trust has been completed and the equitable interest in the trust has vested in the charity … . Thus, while subsection 118.1(5) may apply to deem Mr. X to have made a gift of property (in this case, the property that is the subject of the capital interest) immediately before his death subject to subsection 118.1(13), the provisions of subsection 118.1(5) cannot take effect until the gift is actually completed. A return is filed by the taxpayer's representatives pursuant to paragraph 152(6)(c) to give effect to the deemed disposition immediately before death.

Locations of other summaries		Wordcount
Tax Topics - Income Tax Act - Section 118.1 - Subsection 118.1(18)	gift of shares to a charity is not of non-qualifying securities if immediately after the ownership transfer, the estate now deals at arm's length with the corporation	172

25 November 2005 External T.I. 2005-0139611E5 - Gift of Art by Will

A will indicated that pieces of art in the estate that the spouse did not select within one year of death would be donated to the charity. Because the executor would not have any discretion on whether the paintings would be donated following the one-year period, this gift would qualify as made by the testator's will.

4 April 2003 External T.I. 2002-0176305 F - DON PAR TESTAMENT

gift can be made by will to a foundation formed after testator’s death

Also released under document number 2002-01763050.

CCRA indicated that s. 118.1(5) applied where a will provided for a gift to a private foundation that was to be established after the testator's death, noting that the relevant requirements were that the bequest qualify as a gift by will and that the private foundation qualified as a registered charity at the time the property was delivered to it.

9 August 2000 External T.I. 2000-0029185 - ESTATE DESIGNATES CHARITY AS BENEFICIARY?

If, under the terms of a will, a guaranteed annuity had been donated to a charitable organization, the deceased would be entitled to a non-refundable tax credit based on the fair market value of the annuity.

11 October 1994 External T.I. 9416675 - GIFT OF LIFE INSURANCE POLICY

"Subsection 118.1(5) of the Act does not apply in respect of the death benefit paid on a life insurance policy to a registered charity where the registered charity has been designated as the beneficiary under the policy and no mention of the policy is made in a will."

9 July 1992 External T.I. 5-921172

The payment of proceeds of a life insurance policy pursuant to a designation of a beneficiary in a document other than a will would not constitute a gift by will.

20 December 1989 Memorandum (May 1990 Access Letter, ¶1229)

Where a taxpayer purchases an annuity of which its registered charity is the beneficiary on his death, or where a registered charity is named as the beneficiary under a life insurance contract, no gift is made for purposes of s. 118.1(5) on death.

16 October 89 T.I. (March 1990 Access Letter, ¶1150)

Where Mr. A in his Will provides a life interest to his surviving wife (who is not permitted to encroach), with the residue of the estate on her death to be transferred to a registered charity, Mr. A will be deemed to have made a gift of the residue to the registered charity in the taxation year in which he dies, and his legal representative will be eligible to make the designation under s. 118.1(6) in Mr. A's final return.

Articles

D. Bruce Ball, Brenda R. Dietrich, "Bequests and Estate Planning", Personal Tax Planning, 1999 Canadian Tax Journal, Vol. 47, No. 4, p. 995.

Paragraph 118.1(5)(a)

Subparagraph 118.1(5)(a)(iii)

Administrative Policy

16 December 2011 External T.I. 2011-0412502E5 F - Remboursement - frais de scolarité

credit can be claimed where employee is subsequently required to reimburse employer for employer-paid tuition

An employer paid the tuition fees of one of its employees at a master's program. However, the employee was required to reimburse the employer upon the employee’s failure to return to work for a specified minimum period following the program completion. CRA stated:

[W]here a taxpayer's tuition is paid by the taxpayer’s employer and those expenses are not included in computing the taxpayer’s income, … the taxpayer could, subject always to all other conditions set out in paragraph 118.5(1)(a), claim the tuition tax credit under section 118.5 but only with respect to the portion of the tuition fees that the taxpayer reimbursed to the employer.

Locations of other summaries		Wordcount
Tax Topics - Income Tax Act - Section 118.6 - Subsection 118.6(1) - Qualifying Educational Program	no benefit denying credit if employee is subsequently required to reimburse employer for employer-paid tuition	142

Paragraph 118.1(5)(b)

Administrative Policy

7 October 2022 APFF Financial Strategies and Instruments Roundtable Q. 9, 2022-0940951C6 F - FRB créée par testament après 2015

gift of capital interest in charitable remainder trust is considered to be made by GRE when such interest vests in the charity

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 pursuant to s. 118.1(1)(c)(ii)(A).

Regarding the timing of the gift by the GRE, CRA stated:

By virtue of paragraph 118.1(5)(b), a gift by will is deemed to have been made at the time the property that is the subject of the gift is transferred to the donee and not at any other time. … IT-226R states … that a gift of a capital interest in a trust is made when the transfer of the property to the trust has been completed and the equitable interest in the trust has vested in the qualified done … [which occurs] where, among other conditions, the size of the qualified donee's interest can be ascertained and it is clear that the qualified donee will eventually receive full ownership of the transferred property.

Consequently, the GRE could be considered to have made a gift of the capital interest in the CRT to the qualified donee at the time the CRT is created by GRE and the capital interest vests in the qualified donee, provided that all of the conditions set out in paragraph 2 of IT-226R are satisfied.

Locations of other summaries		Wordcount
Tax Topics - Income Tax Act - Section 118.1 - Subsection 118.1(5.1)	a gift by will of a capital interest in a charitable remainder trust can be claimed only by the GRE, not the deceased	338

24 July 2017 External T.I. 2017-0698191E5 - Gift of securities by executors of a will

an estate gift of sales proceeds of s. 70(5) property can be carried back to the terminal return

Following the death of the deceased in 2016, the executors of his estate (a graduated rate estate) sell mutual fund units (whose adjusted cost base had been stepped-up under s. 70(5)) in order to make a charitable donation in their discretion. Could the donation of the cash (viewed as substituted property) be deducted in the terminal return pursuant to s. 118.1(5.1) and s. (c)(i)(C) of the definition of “total charitable gifts” in s. 118.1(1)? CRA responded:

[P]ursuant to subsection 248(5), the cash would be property substituted for the property that was acquired by the estate on and as a consequence of the death of the deceased (the mutual fund units acquired by the estate upon the death of the deceased that were subsequently sold and cash realized). Therefore, as subsection 118.1(5.1) would apply to the donation the donation credit can be claimed on the final return of the deceased pursuant to clause (c)(i)(C) of the definition of “total charitable gifts” in subsection 118.1(1).

Locations of other summaries		Wordcount
Tax Topics - Income Tax Act - Section 118.1 - Subsection 118.1(1) - Total Charitable Gifts - Paragraph (c) - Subparagraph (c)(i) - Clause (c)(i)(C)	estate gift of cash proceeds of s. 70(5) securities can be carried back to terminal return	131
Tax Topics - Income Tax Act - Section 38 - Paragraph 38(a.1) - Subparagraph 38(a.1)(ii)	s. 38(a.1)(ii) zeroes post-death appreciation on estate-donated shares	229

Subsection 118.1(5.1) - Direct designation — insurance proceeds

Administrative Policy

7 October 2022 APFF Financial Strategies and Instruments Roundtable Q. 9, 2022-0940951C6 F - FRB créée par testament après 2015

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

CRA noted in this regard 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:

In the case of a gift of a capital interest in a CRT, the subject matter of the gift is that interest and not the property that is transferred to the CRT by the GRE. The CRA's position is that this capital interest in the CRT cannot have been acquired by the GRE on and as a consequence of the individual's death, nor can it be a substituted property for a property so acquired by the GRE.

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.

Locations of other summaries		Wordcount
Tax Topics - Income Tax Act - Section 118.1 - Subsection 118.1(5) - Paragraph 118.1(5)(b)	gift of capital interest in charitable remainder trust is considered to be made by GRE when such interest vests in the charity	314

19 April 2017 External T.I. 2016-0625841E5 F - Gift of equitable interest in a trust

s. 118.1(5.1) does not apply where a GRE donates a capital interest in a charitable residual trust created by will

A graduated rate estate ("GRE") donated a capital interest, in a charitable residual trust created by will, to a qualified donee. Is it eligible for the donation tax credit and would s. 118.1(5.1) apply?

After noting that, in order for the gift to be included in the total charitable donations of the estate (or the deceased) under (c)(ii)(B) (or s. (c)(i)(C)) of the definition in s. 118.1(1) of "total charitable gifts" (the “Definition”), there was a requirement inter alia that s. 118.1(5.1) deem the gift to have been made by the estate, CRA stated:

Subsection 118.1(5.1) applies in particular to a gift made by a GRE of an individual whose death occurs after 2015 if the subject of the gift is property that was acquired by the estate on and as a consequence of the death or is property that was substituted for that property.

...[T]he subject of the gift is the capital interest in the trust and… such capital interest in the trust cannot have been acquired by the GRE at the time of the individual's death or as a consequence of the death. Therefore, subsection 118.1(5.1) does not apply.

However, under (c)(ii)(A) of the Definition, the eligible amount of a gift of an interest in a trust could be included in the computation of the total charitable gifts of the GRE in the taxation year in which the gift is made or in any of the five subsequent taxation years.

Locations of other summaries		Wordcount
Tax Topics - Income Tax Act - Section 118.1 - Subsection 118.1(1) - Total Charitable Gifts - Paragraph (c) - Subparagraph (c)(ii) - Clause (c)(ii)(B)	(c)(ii)(A) rather than (c)(ii)(B) applies where a GRE charitably donates a capital interest in a charitable residual trust created by will	173

8 February 2017 External T.I. 2017-0684481E5 - Status as a graduated rate estate

estate can make a gift qua GRE before it has filed its first return

The estate of Mr. X, who died on January 15, 2016, and which makes a charitable donation on February 15, 2017, meets all of the requirements to be a graduated rate estate (“GRE”), except that it does not meet the requirements in paras. (c) and (d) of the GRE definition solely due to it not having filed its return of income for its first taxation year until thereafter (on April 1, 2017). Can this donation be treated as a GRE donation and claimed in the deceased’s final return? CRA responded:

[T]he wording of the Act does not prevent a donation to which subsection 118.1(5.1) will apply from being made by an estate prior to its filing of its return of income for its first taxation year.

Accordingly…as long as the estate of Mr. X meets all of the requirements in the GRE definition at the time of the filing of its first return of income on April 1, 2017, subsection 118.1(5.1) will apply to the donation if the requirements contained therein are met. In that case, the eligible amount of the donation can be claimed in the deceased’s return of income for the year of death or the immediately preceding year, or in the GRE’s return of income for the year of the donation or the previous year of the GRE. Any unused donation amount can be carried forward from the year in which the donation is made and claimed by the GRE within the limits in the Act.

Locations of other summaries		Wordcount
Tax Topics - Income Tax Act - Section 248 - Subsection 248(1) - Graduated Rate Estate	gift can be made qua GRE before paras. (c) and (d) satisfied	46

7 October 2016 APFF Financial Strategies and Instruments Roundtable Q. 8, 2016-0651731C6 F - Gift by a Former Graduated Rate Estate

qualification of gift made in Year 5 of former GRE

Where an estate which otherwise would still be a graduated rate estate but for the passage of 36 months from the date of death makes a charitable gift in Year 5 of the estate (i.e., within 60 months of the death as required by s. 118.1(5.1)), that gift can be claimed in the year of death of the deceased or in the preceding year (s. (c)(i)(C) of the “total charitable gifts definition”), or (under s. (c)(ii)(A)) in the year of the gift or in one of the five following years (i.e., in Years 5 to 10), but cannot be claimed in any of Years 1 to 4.

Locations of other summaries		Wordcount
Tax Topics - Income Tax Act - Section 118.1 - Subsection 118.1(1) - Total Charitable Gifts - Paragraph (c) - Subparagraph (c)(ii)	gifts made in Year 5 by a but-for GRE can only be claimed before death or in Years 5 to 10	389

10 June 2016 STEP Roundtable Q. 1, 2016-0634871C6 - GREs and Testamentary Trusts

estate must continue to satisfy the other GRE requirements following 36 mos.

A deceased taxpayer’s will provides that the division of the estate assets into a spousal and children’s trust. As donations now must be made by the general estate and not the other testamentary trusts, does this mean that the general estate must remain until the donations are made (up to the 60^th month)?

CRA indicated that although, by definition, a graduated rate estate can exist for a maximum of 36 months after death, proposed s. 118.1(5.1) provides that estates which cease to be GREs solely by reason that 36 months have passed since death, can make a donation within 60 months of death. However, all of the other requirements of the GRE definition, must be met, including that the estate arose on or as a consequence of the individual’s death.

Locations of other summaries		Wordcount
Tax Topics - Income Tax Act - Section 248 - Subsection 248(1) - Graduated Rate Estate	division of an estate into testamentary trusts may accelerate (perhaps back to inception) the demise of the estate as a GRE	449
Tax Topics - Income Tax Act - Section 108 - Subsection 108(1) - Testamentary Trust - Paragraph (b)	trusts on estate residue arise on death	90

18 June 2015 STEP Roundtable Q. 11, 2015-0578551C6 - 2015 STEPQ11-Subsection 118.1(5.1)-sub property

share redemption proceeds – but not by a dividend – are substituted property

Amended s. 118.1(5.1) require that a donation be a gift of "property that was acquired by the estate on and as a consequence of the death" or "property that was substituted for that property." The individual, at death after 2015, held "Holdco" owning appreciated marketable securities. The estate is directed by will to make a donation.

Scenario 1

Holdco sells the securities and pays a dividend to the graduated rate estate, which makes the donation. Would the cash from the dividend be considered substituted property?

CRA responded that the estate has not replaced the Holdco shares received on death, so that the cash dividend is not property substituted for the Holdco shares. As the requirement in s. 118.1(5.1)(b) is not met, only the estate could claim a donation in the year or in the five subsequent taxation years.

Scenario 2

Estate transfers the shares of Holdco under s. 85(1) to Newco and takes back high PUC shares of Newco. Holdco is wound up and Newco receives the marketable securities (whose adjusted cost base has been "bumped" under s. 88(1)(d).) Newco uses the proceeds of sale of the securities to purchase for cancellation some of the estate's shares. Estate uses such cash to make the charitable donation. Is the donation is made with substituted property?

CRA responded that, as the shares of Holdco (which were received on death) are disposed of in exchange for the Newco shares, the Newco shares are substituted property. Furthermore, the cash received on the purchase for cancellation would be substituted property for the cancelled Newco shares and, under the extended meaning of "substituted property" in s. 248(5)(a), that cash also would be substituted property for the Holdco shares. Accordingly, s. 118.1(5.1)(b) would be satisfied.

Words and Phrases

substituted

Articles

Jessica Fabbro, "Dying to Donate – Determining Charitable Donation Tax Credits on Death after 2015", Tax Topics, Wolters Kluwer, Number 2249, April 16, 2015

Allocation of gifts on death (p.2)

The amended Legislation will no longer deem all charitable gifts to have been made by the deceased immediately prior to the deceased's death. Instead, all charitable gifts made by the deceased on his or her death will be deemed to have been made by the deceased's estate at the time the property is transferred to the donee. [fn 12: Subsection 118.1(5), effective 2016] … While this would seemingly eliminate the deceased's ability to claim the CDTC [charitable donations tax credit] on his or her terminal tax return or penultimate tax return, the definitions of "total charitable gifts", "total cultural gifts", and "total ecological gifts" have all been amended to allow the executors to allocate the charitable gifts made by the deceased on death between the deceased and the deceased's estate, provided that the deceased's estate is a "graduated rate estate" at the time the gift is made.

Spousal credit claim (p. 3)

[N]one of the amendments will permit the deceased's spouse to claim the CDTC with respect to charitable gifts made by his or her spouse on death. Furthermore, the CRA has confirmed that it will no longer apply this administrative position to gifts made under a wilt, as the gift will no longer be deemed to have been made by the deceased, but is deemed to have been made by the estate instead. [fn 20: … 2014-0555511E5…] As a result, after the amendments are in force, spouses will have less flexibility with respect to the allocation of charitable gifts between themselves than they did under the CRA's former administrative position.

Need for further valuations at gift time (p. 3)

[U]nder the current legislation, no further valuations are required when the property is transferred to the donee, because the charitable gift is deemed to have been made by the deceased at the exact same time the deceased is deemed to have disposed of all of his or her assets. However, under the amended legislation, the gift is deemed to have been made by the estate at the time the property is transferred to the donee. If the gift is not a cash gift, the executors will likely have to carry out another valuation of the gifted property at the time the gift is made,…

Potential for gifts to be made after estate ceases to be graduated rate estate (p.4)

The treatment of charitable gifts made by estates that are not graduated rate estates is particularly disconcerting for gifts of all or a portion of the residue of more complex estates, as these estates may take more than 36 months to fully administer and would therefore cease to be graduated rate estates before the gifted property can be transferred to the donee. Similarly, if the estate is the subject of litigation, the executors of the estate may be unable to transfer property that is the subject of a charitable gift within 36 months after the donor's death and the estate may cease to be a graduated rate estate before the gifted property can be transferred.

Individuals can mitigate the risks that their charitable gifts will not be completed within 36 months after their death by making Direct Designation Gifts [from RRPs etc.] instead of making their charitable gifts under a will, as the assets comprising the Direct Designation Gifts will not form part of the deceased's estate. Another alternative for individuals who anticipate having a complex estate would be to make specific bequests to qualified donees in their will instead of making a gift of the residue,…

Paragraph 118.1(5.1)(b)

Administrative Policy

2023 Ruling 2020-0862441R3 - Charitable donation by Estate

cash extracted from an estate subsidiary can be rendered substituted property for s. 118.1(5.1)(b) purposes by having such cash paid as redemption proceeds

Background

At the time of the proposed transactions, the Estate of the deceased held the common shares of Aco, which the Estate had acquired through a reorganization of various shares (together with some related indebtedness). In particular, Aco was the result of the amalgamation of Bco with Cco, whose shares had been held by the deceased and then transferred on a s. 85(1) rollover basis by the Estate to Bco. Bco had been incorporated as a Newco by the Estate to acquire the Estate’s shares of Dco on a rollover basis, with Dco then being wound up.

Dco resulted from the amalgamation of Fco (distributed to the Estate from the spousal trust of his deceased mother given that the deceased had been a beneficiary of that trust) and Eco.

Eco was the result of the amalgamation of Gco and Hco. The deceased had held shares of Gco at the deceased’s death, and the estate then transferred those shares on a s. 85(1) rollover basis to a Newco formed by the estate (Hco).

Proposed transactions

Aco will declare and pay a dividend to the Estate, which the Estate will use to pay off liabilities.
Aco will pay a stock dividend on its common shares consisting of newly created preferred shares, and then redeem those shares for cash and make a s. 83(2) election for the resulting deemed dividend to be treated as a capital dividend.
Aco will repurchase the common shares of Aco for a cash amount equal to their paid-up capital, and then issue one common share to the Estate.
Aco will repay the balance of the shareholder loan account to the Estate.
Pursuant to a deed of gift, the Estate will gift the amount of cash received in 2 and 3 minus expenses (the “Final Donation Amount”) to a qualified donee.

Purposes

The purpose of the payment in 1 is to ensure that the dividends received by the Estate are used to pay the Estate’s liabilities and are not donated to the qualified donee, because the cash received in payment of the dividends would not constitute property that was acquired by the Estate on and as a consequence of the death of the deceased or property substituted for that property, as required by s. 118.1(5.1)(b).

The transaction in 2 is structured as the declaration of a stock dividend followed by the redemption of the shares issued in satisfaction of the stock dividend in order to satisfy the requirements of s. 118.1(5.1)(b) and the CRA’s position that cash paid as actual dividends cannot be substituted property.

The purpose of 3 is to return the capital account of the common shares of Aco to the Estate in substitution for its common shares, while also issuing a new common share so that Aco will have one common share outstanding.

Ruling

For the purposes of s. 118.1(5.1)(b), the Final Donation Amount is property that was acquired by the Estate on and as a consequence of the death of the deceased or is property that was substituted for that property.

Locations of other summaries		Wordcount
Tax Topics - Income Tax Act - Section 248 - Subsection 248(5) - Paragraph 248(5)(b)	cash received as redemption proceeds for pref paid as stock dividend on shares was substituted property	253

2 December 2020 External T.I. 2017-0734261E5 - Charitable Remainder Trusts

will-directed formation by a GRE of a charitable remainder trust cannot benefit the deceased’s terminal return under s. 118.1(5.1)(b)

A terms of a charitable remainder trust (“CRT”), created by the will of a deceased taxpayer to hold property received by the graduated rate estate (“GRE”) on and as a consequence of the individual’s death, provide for all the income earned by the CRT to be paid to the surviving spouse (or other family member) and, on the death of that survivor, for the property to be transferred to a qualified donee. Will s. 118.1(5.1)(b) apply to the gift of the equitable interest in such testamentary trust on the basis that such interest is property that is substituted for the remainder interest in the property owned at the time of death that is received by the GRE on and as a consequence of the death of the individual? CRA responded:

[T]he equitable interest in the CRT is created as a result of the transfer of property to the CRT by the GRE. The gift of the equitable interest in the CRT is considered to have been made to the qualified donee when the property is transferred to the CRT, provided that the equitable interest in the CRT vests with the qualified donee at that time (and all other requirements are met). … The GRE does not receive the equitable interest in the CRT in return for the transfer. … [T]he property received by the GRE on and as a consequence of the death of the individual is not substituted for or replaced by the equitable interest in the CRT received by the qualified donee. As a result, the equitable interest in the CRT is not property received by the GRE on and as a consequence of the death, or property substituted for that property. Accordingly, paragraph 118.1(5.1)(b) does not apply … .

Locations of other summaries		Wordcount
Tax Topics - Income Tax Act - Section 118.1 - Subsection 118.1(1) - Total Charitable Gifts - Paragraph (c) - Subparagraph (c)(i) - Clause (c)(i)(C)	rule inapplicable to testamentary creation of charitable remainder trust	260

Subsection 118.1(6) - Gifts of capital property

Administrative Policy

28 June 1993 T.I. (Tax Window, No. 32, p. 11, ¶2605)

The election under s. 118.1(6) is available in respect of the gift of an equitable interest in a trust.

Locations of other summaries		Wordcount
Tax Topics - Income Tax Act - Section 104 - Subsection 104(21)		54

15 January 1991 T.I. (Tax Window, Prelim. No. 3, p. 5, ¶1093)

The election is not available to a spousal trust under which the trust property is to be distributed to registered charities after the death of the spouse, as in such case the spouse trust would not be considered to have made a gift.

20 October 89 T.I. (March 1990 Access Letter, ¶1151)

Mr. X dies leaving assets in a spousal trust with power to the trustees to encroach on capital and with the direction that the residue of the trust is to be donated to a charitable organization on the spouse's death. On the death of the spouse, s. 118.1(6) will not apply to limit the fair market value proceeds deemed to be received pursuant to s. 104(4)(a) because it was Mr. X by his Will, rather than the spousal trust, which made the donation. Because of the power of encroachment, Mr. X could not be considered to have made a gift at the time of his death, so that s. 118.1(5) could not apply.

IT-297R2 "Gifts in Kind to Charity and Others"

Articles

Elie Roth, Tim Youdan, Chris Anderson, Kim Brown, "Taxation of Trusts Resident in Canada", Chapter 3 of Canadian Taxation of Trusts, (Canadian Tax Foundation), 2016.

Immediate reduction of capital gain/deferred credit (pp. 197-8)

A subsection 118.1(6) election can be made in respect of a gift of non-qualifying securities to immediately reduce the capital gain realized, in respect of the gift, even though the charitable donation tax credit is available only at a subsequent time. [F.n.259 – CRA document no. 2013-0486701E5, July 15, 2013.] For example, assume that a trust holds private company shares with a fair market value of $1 million and a $100,000 cost, and it wants to donate the shares to a private foundation. If the trustees donate the shares to the foundation, the trust is subject to tax in respect of a $450,000 taxable capital gain. However, the trustees can make an election under subsection 118.1(6), in which case the trust is deemed to have disposed of the shares for an amount equal to their adjusted cost base so that no gain is realized. Subsection 118.1(13) provides that the gift is not made until a subsequent year when the shares cease to be non-qualifying securities or are disposed of by the foundation.

Locations of other summaries		Wordcount
Tax Topics - Income Tax Act - Section 108 - Subsection 108(3)		392
Tax Topics - Income Tax Act - Section 251.1 - Subsection 251.1(4) - Paragraph 251.1(4)(d)		461
Tax Topics - Income Tax Act - Section 251.1 - Subsection 251.1(1) - Paragraph 251.1(1)(g) - Subparagraph 251.1(1)(g)(ii)		123
Tax Topics - Income Tax Act - Section 164 - Subsection 164(6)		151
Tax Topics - Income Tax Act - Section 112 - Subsection 112(3.2)		349
Tax Topics - Income Tax Act - Section 107 - Subsection 107(1)		152
Tax Topics - Income Tax Act - Section 251.2 - Subsection 251.2(3) - Paragraph 251.2(3)(b)		120
Tax Topics - Income Tax Act - Section 252.2 - Subsection 252.2(2)		129
Tax Topics - Income Tax Act - Section 256 - Subsection 256(7) - Paragraph 256(7)(i)		202
Tax Topics - Income Tax Act - Section 70 - Subsection 70(6) - Paragraph 70(6)(d.1)		169
Tax Topics - Income Tax Act - Section 70 - Subsection 70(6)		1283
Tax Topics - Treaties - Income Tax Conventions - Article 29B		247
Tax Topics - Income Tax Act - Section 248 - (2)-(41)		171
Tax Topics - Income Tax Act - Section 248 - Subsection 248(8)		227
Tax Topics - Income Tax Act - Section 104 - Subsection 104(4) - Paragraph 104(4)(a.2)		65
Tax Topics - Income Tax Act - Section 104 - Subsection 104(4) - Paragraph 104(4)(a.3)		44
Tax Topics - Income Tax Act - Section 104 - Subsection 104(6)		178
Tax Topics - Income Tax Act - Section 104 - Subsection 104(24)		175
Tax Topics - Income Tax Act - Section 105 - Subsection 105(1)		107
Tax Topics - Income Tax Act - Section 104 - Subsection 104(18)		59
Tax Topics - Income Tax Act - Section 104 - Subsection 104(7.01)		78
Tax Topics - Income Tax Act - Section 104 - Subsection 104(19)		340
Tax Topics - Income Tax Act - Section 104 - Subsection 104(13)		133
Tax Topics - Income Tax Act - Section 20 - Subsection 20(1) - Paragraph 20(1)(bb)		158
Tax Topics - Income Tax Act - Section 104 - Subsection 104(2)		411

Subsection 118.1(7.1) - Gifts of cultural property

Administrative Policy

S4-F14-C1 - Artists and Writers

Review of requirements for s. 118.1(7.1) deduction

1.88 As discussed in ¶1.82, an individual who is a visual artist carrying on an artistic business might make a gift of a work of art from their inventory. Subject to the comments in ¶1.89 and 1.94, the individual is deemed by subparagraph 69(1)(b)(ii) to have received proceeds of disposition for the work of art equal to its FMV at the time of the gift and that FMV must generally be included in the individual's income. However, where the work of art is disposed of by making a charitable gift to a qualified donee, the FMV of the work of art will also be used to calculate the eligible amount of the gift for purposes of claiming a donation tax credit.

1.89 A visual artist making a charitable gift of a work of art to a qualified donee may be able to make a designation under subsection 118.1(7.1). The amount designated under subsection 118.1(7.1) will be deemed to be the individual's proceeds of disposition in respect of the work of art, and the FMV for purposes of calculating the eligible amount of the gift that is eligible for the donation tax credit.

1.90 Under subsections 118.1(7) and (7.1), an individual will only be able to make a designation under subsection 118.1(7.1) in respect of a charitable gift of a work of art to a qualified donee where:

the work of art is of the individual's own creation;

the work of art is property in the individual’s inventory; and

at the time of the gift, the FMV of the property is greater than its cost amount (in other words, its inventory value—see ¶1.32 to 1.36).

1.91 An individual makes a designation under subsection 118.1(7.1) by reporting their designated amount in their income tax return for the tax year in which the gift was made. A designation under subsection 118.1(7.1) is of no effect to the extent that the designated amount:

exceeds the FMV of the work of art otherwise determined; or

is less than the greater of the amount of any advantage in respect of the gift and the cost amount to the individual of the work of art.

1.92 Subsection 118.1(7.1) also applies in respect of gifts of certified cultural property (see ¶1.84) where:

the work of art is of the individual’s own creation

the work of art is property in the individual’s inventory, and

at the time of the gift, the FMV of the property is greater than its cost amount (in other words, its inventory value—see ¶1.32 to 1.36).

More favourable rules for certified cultural property

1.93 When subsection 118.1(7.1) applies to a gift of certified cultural property that meets the requirements in ¶1.92, no designation is required. The individual will be deemed to have received proceeds of disposition in respect of the work of art equal to the greater of its cost amount and the amount of any advantage received in respect of the gift. Consequently, provided no advantage is received in respect of the gift, no profit or loss will result from the disposition arising on the gift of the work of art by the individual. Where an advantage is received or enjoyed in respect of the gift of certified cultural property, the individual would include in computing business income from the disposition of the work of art the amount, if any, by which the advantage exceeds the individual's cost of the work of art.

1.94 Even though subsection 118.1(7.1) will deem the proceeds of disposition to be less than the FMV of the work of art being gifted, subsections 118.1(3) and (10) will still allow the FMV of the work of art established by the CCPERB to be used in determining the eligible amount of the gift for purposes of the donation tax credit, provided the requirements set out in ¶1.85 and 1.86 are met.

Locations of other summaries		Wordcount
Tax Topics - General Concepts - Substance		93
Tax Topics - Income Tax Act - Section 5 - Subsection 5(1)		469
Tax Topics - Income Tax Act - Section 3 - Paragraph 3(a) - Business Source/Reasonable Expectation of Profit		582
Tax Topics - Income Tax Act - Section 9 - Nature of Income		298
Tax Topics - Income Tax Act - Section 10 - Subsection 10(6)		272
Tax Topics - Income Tax Act - Section 18 - Subsection 18(1) - Paragraph 18(1)(a) - Income-Producing Purpose		599
Tax Topics - Income Tax Act - Section 8 - Subsection 8(1) - Paragraph 8(1)(p)		573
Tax Topics - Income Tax Act - Section 8 - Subsection 8(1) - Paragraph 8(1)(q)		1067
Tax Topics - Income Tax Act - Section 56 - Subsection 56(3) - Paragraph 56(3)(b)		527
Tax Topics - Income Tax Regulations - Regulation 200 - Subsection 200(2)		103
Tax Topics - Income Tax Act - Section 9 - Capital Gain vs. Profit - Commodities, and commodities futures and derivatives		122
Tax Topics - Income Tax Act - Section 118.1 - Subsection 118.1(1) - Total Cultural Gifts		334

Articles

Innes, "Gifts of Cultural Property by Artists", Estates and Trust Journal, Volume 12, No. 3, March 1993.

Subsection 118.1(8)

Administrative Policy

T4068(E) Guide for the Partnership Information Return (T5013 Forms)

Partnership donations treated as made by the partners

Chapter 8 – T5013 schedules …

T5013 SCH 1, Net Income (Loss) for Income Tax Purposes …

Filling out the T5013 SCH 1 …

Line 112 – Charitable donations and gifts from the T5013 SCH 2

Charitable donations and gifts – The eligible amount of the charitable donations and other gifts are eligible for non-refundable tax credits for individuals and deductions for corporations.

We consider that the partners made the gift in their own tax year in which the partnership's fiscal period ends. The partnership cannot deduct charitable donations and other gifts when calculating its income or loss for tax purposes. If a partnership deducted such amounts from its income for accounting purposes, add them back to calculate the partnership's income or loss for tax purposes.

Locations of other summaries		Wordcount
Tax Topics - Income Tax Act - Section 96 - Subsection 96(4)		218
Tax Topics - Income Tax Act - Section 96		39
Tax Topics - Income Tax Regulations - Regulation 229 - Subsection 229(1)		242
Tax Topics - Income Tax Act - Section 96 - Subsection 96(1.01)		149
Tax Topics - Income Tax Act - Section 110.1 - Subsection 110.1(4)		151

Subsection 118.1(11)

Cases

YELLOW POINT LODGE LTD. v. HER MAJESTY THE QUEEN, 2020 FCA 195

requirement to assess where conditions met

A taxpayer, who donated an interest in ecologically sensitive land to two qualified donees in 2008, unsuccessfully argued that the gift was not made until 2009 for purposes of computing the five-year (now 10-year) carryforward period described in s. 110.1(1)(d)(iii), because it was not until 2009 that he received the certification from the Minister of the Environment as to the land's ecologically sensitive nature and value that was required under that provision. After confirming that the ecological gift instead was made in 2008 when ownership of the gifted property was transferred, Noël CJ went on to note (at para. 54) that “the existing process [under s. 118.1(11)] ensures that a taxpayer can claim a deduction in the year in which the gift is made and the subsequent five taxation years, even if there are delays in the final determination of the fair market value of the gifted property. In this regard, he stated (at paras. 49, 53):

While the permissive word “peut” (“may”) and the imperative word “shall” seem irreconcilable …, there is no discrepancy in this case. Both versions of subsection 118.1(11) compel the Minister to assess or reassess in order to give effect to a certificate or a court decision confirming or varying the certified fair market value. …

[T]he use of the word “peut” in the French version illustrates how “an official who is permitted to do a thing may, in addition, be obliged to do it” (Ruth Sullivan, Sullivan on the Construction of Statutes …). … Although the English text does not use the word “may” to denote the fact that the Minister is allowed to assess out of time, the statutory permission is equally present because the obligation to assess out of time necessarily brings with it the right to do so. So read, both texts require the Minister to abide by a fair market value certificate or the final court decision confirming it or varying it, and for that purpose, allow the Minister to assess out of time. …

Words and Phrases

may

Locations of other summaries		Wordcount
Tax Topics - Income Tax Act - Section 110.1 - Subsection 110.1(1) - Paragraph 110.1(1)(d) - Subparagraph 110.1(1)(d)(iii)	ecological gift was made in the year its ownership was transferred rather than subsequently when the certification conditions under s. 110.1(1)(d)(ii) were met	310
Tax Topics - Statutory Interpretation - French and English Version	"peut" (may) in French version accorded with a sense of the English version's "shall"	80

Subsection 118.1(13) - Non-qualifying securities

Administrative Policy

2 January 2014 Internal T.I. 2013-0490141I7 - Charitable Donations

s. 118.1(5) applied where gift of subsidiary notes satisfied with subsidiary property

A testator bequeathed half the residue of his estate to a charitable foundation. The executors apparently satisfied this bequest, in part, by having an investment holding company issue notes to it in satisfaction of dividends, gifted the notes to the foundation, with the notes being paid off with a transfer of marketable securities by the holding company to the foundation. In finding that the testator was thereby deemed by s. 118.1(5) to have made a gift in his terminal year, the Directorate noted that "nothing in the terms of the Will provided for any discretionary powers vested in the Trustees to modify this specific bequest," and stated:

Generally, pursuant to paragraph 118.1(13)(c), where the non-qualifying security is disposed of by the donee within 60 months, the donor may be treated as having made the gift (the value of which is deemed pursuant to that paragraph) at this later time. However, it should be noted that by virtue of subsection 118.1(15), in this case, for purposes of section 118.1, the gift shall be deemed to have been made by the Deceased immediately before his death.

See summary under s. 118.1(5).

Locations of other summaries		Wordcount
Tax Topics - Income Tax Act - Section 118.1 - Subsection 118.1(5)	s. 118.1(5) applied where discretion in gift mechanics	615

15 July 2013 External T.I. 2013-0486701E5 - Gift by will of a non-qualifying security

There is a gift by will of a non-qualifying security ("NQS") to a qualified donee where the legal representative of the deceased individual makes a designation under s. 118.1(6) in respect of the gift. The correspondent submitted that s. 118.1(5) applies to deem the gift of the NQS to have been made immediately before the death of the deceased individual for proceeds of disposition equal to the amount designated under s. 118.1(6), so that s. 118.1(5), rather than s. 70(5)(a), is the provision causing recognition of any capital gain in the terminal return. CRA instead found that the NQS was deemed to be disposed of by s. 70(5)(a), albeit for the designated proceeds under s. 118.1(6) rather than for fair market value proceeds:

Subsection 118.1(13), which applies for the purpose of section 118.1, provides that where at any particular time an individual makes a gift of a NQS ... and the gift is not an excepted gift, the gift is deemed not to have been made. However, paragraph 118.1(13)(a) provides an exception from this deeming rule for the purpose of applying subsection 118.1(6) to determine the proceeds of disposition of the NQS.

Essentially, notwithstanding that a gift by will of a NQS is deemed not to have been made, the legal representative may, by reason of the exception in paragraph 118.1(13)(a), designate an amount as the proceeds of disposition of the NQS under subsection 118.1(6) to reduce the amount of any capital gain that might otherwise result from the disposition of the NQS. In such circumstances, the designated amount in respect of the NQS (rather than its FMV as provided for in paragraph 70(5)(a)) is used in calculating the amount of the capital gain arising on the deemed disposition of the NQS immediately before the individual's death.

... However, for capital gain purposes, paragraph 70(5)(a) operates to deem the NQS to have been disposed of immediately before death but the proceeds of disposition would be the designated amount under subsection 118.1(6).

Articles

Wolfe D. Goodman, "Commentary on Some Revenue Canada Rulings Regarding Charitable Gifts", Goodman on Estate Planning, Vol. VIII, No. 4, p. 642.

Paragraph 118.1(13)(c)

Administrative Policy

7 October 2021 APFF Roundtable Q. 14, 2021-0901041C6 F - Meaning of Any consideration received by Donee

“consideration … received” in s. 118.1(13)(c) includes a s. 84(3) deemed dividend

Under s. 118.1(13)(c), where a qualified donee that disposes of non-qualifying securities (“NQS”) that were gifted to it, the amount of the original gift will be deemed in some circumstances to equal the fair market value of the “consideration” received by the donee for that subsequent disposition. Is the FMV “of any consideration received by the donee for the disposition” of the NQS not limited to the specific concept of "proceeds of disposition" under s. 54, and may include an s. 84(3) deemed dividend received by the donee on that disposition (where it is a share redemption)? CRA responded:

[G]enerally speaking, and in the absence of any indication to the contrary … the notion of "consideration" is broad enough to encompass any amount, good or service received upon the disposition of property.

The CRA is of the view that the word "consideration" in the phrase "fair market value of any consideration … received by the donee for the disposition … of the security" in paragraph 118.1(13)(c) must be given the broad meaning generally accepted in the jurisprudence. Thus, for the purposes of paragraph 118.1(13)(c), the expression "consideration received for the disposition" is not limited to "proceeds of disposition" as defined in section 54.

Consequently, the CRA is of the view that for the purposes of paragraph 118.1(13)(c), the consideration received by the qualified donee for the disposition of a NQS may include the portion of such consideration that is a deemed dividend received by the qualified donee pursuant to subsection 84(3) on a redemption of shares.

Words and Phrases

consideration

2017 Ruling 2016-0628181R3 - Donation of shares to private foundation

gift of NQS in portfolio company cured when company wound-up into charity

commented on in 2020-0851991C6 F

Background

At the date of death of B (who had survived her husband A) she held common shares of Holdco and a testamentary spousal trust held the balance of Holdco’s shares. A private foundation (the “Foundation”) that had been established by A and B was the beneficiary of the spousal trust on B’s death. She was deemed to realize a capital gain under s. 70(5)(a) (and the spousal trust realized a capital gain under s. 104(4)(a).)

Proposed transactions

Pursuant to B’s wills, B’s estate will gift its Holdco common shares to the Foundation. Thereafter, Holdco will redeem all of the Holdco common shares held by the Foundation for an amount equal to their fair market value, paid in cash or in kind using the Holdco assets.

Ruling

B will be deemed to have made a gift of property to the Foundation in accordance with s. 118.1(13)(c) if the above redemption occurs and the other s. 118.1(13)(c) conditions are met, and such gift of property will be deemed under s. 118.1(15) to have been made by B in her terminal year.

Locations of other summaries		Wordcount
Tax Topics - Income Tax Act - Section 129 - Subsection 129(1.2)	s. 129(1.2) denies a dividend refund on the wind-up of a private company bequeathed (but not gifted) to a private foundation	264
Tax Topics - Income Tax Act - Section 118.1 - Subsection 118.1(1) - Total Charitable Gifts	residue paid under terms of spousal trust to charitable beneficiary was not a gift	139
Tax Topics - Income Tax Act - Section 118.1 - Subsection 118.1(15)	gift of shares (NQS) of portfolio company retroactively deemed to be made in terminal year once company wound up into charity	100

Subsection 118.1(15)

Administrative Policy

2017 Ruling 2016-0628181R3 - Donation of shares to private foundation

gift of shares (NQS) of portfolio company retroactively deemed to be made in terminal year once company wound up into charity

commented on in 2020-0851991C6 F

The estate of B gifts her shares of a portfolio holding company (“Holdco”) to a private foundation, with Holdco thereafter using its liquid assets to redeem the common shares held by the private foundation. CRA ruled that, notwithstanding the status of the gifted shares as non-qualifying securities, the gift will be recognized under s. 118.1(13)(c) once the gifted shares are disposed of by virtue of their redemption - and that such gift will be deemed under s. 118.1(15) to have been made by B in her terminal year (so that her s. 70(5) gain on the shares can be sheltered).

Locations of other summaries		Wordcount
Tax Topics - Income Tax Act - Section 118.1 - Subsection 118.1(13) - Paragraph 118.1(13)(c)	gift of NQS in portfolio company cured when company wound-up into charity	210
Tax Topics - Income Tax Act - Section 129 - Subsection 129(1.2)	s. 129(1.2) denies a dividend refund on the wind-up of a private company bequeathed (but not gifted) to a private foundation	264
Tax Topics - Income Tax Act - Section 118.1 - Subsection 118.1(1) - Total Charitable Gifts	residue paid under terms of spousal trust to charitable beneficiary was not a gift	139

Subsection 118.1(16)

Administrative Policy

7 October 2019 Internal T.I. 2019-0801871I7 - Loanbacks

each gift is reduced by the aggregate NAL loans

In the first situation, a corporation makes a gift to a private foundation and within the following 60 months, the foundation makes interest-bearing loans to that corporation and to an individual not dealing at arm's length with the corporation that are repaid within 60 months.

In the second scenario, a private foundation makes interest-bearing loans (also repaid within 60 months) to multiple corporations not dealing at arm’s length with each other. Within 60 months thereafter, the corporations make gifts to the foundation.

Would ss. 118.1(16) and 110.1(6) apply to reduce the fair market value of the gifts by the loan amounts? CRA responded:

Subsection 118.1(17) of the Act applies on a taxpayer by taxpayer basis and applies to corporations by virtue of subsection 110.1(6) of the Act. Where multiple taxpayers make a gift to a qualified donee and persons with which these taxpayers do not deal at arm's length use property of the donee, the provision will be applied to each donor separately. Accordingly, where multiple donors who do not deal at arm's length with each other each make a gift to a qualified donee and an amount is loaned by the donee to one or more of these donors, the total amount of the loans will be taken into account to reduce the fair market value of the gift made by each of the donors.

[S]ubsections 118.1(16) and 110.1(6) … apply to reduce the fair market value of a gift by a donor to a private foundation, by the unpaid balance at the time of the gift, of any loan advanced by the foundation to the donor (or to persons or partnerships who do not deal at arm's length with the donor) prior to the time of the gift pursuant to an agreement entered into in the 60 months prior to the time of the gift. Subsections 118.1(16) and 110.1(6) of the Act also apply to any new loan provided by the foundation to the donor (or to persons or partnerships who do not deal at arm's length with the donor) within 60 months after the time of the gift. … [T]he Act does not provide for the reinstatement of a gift for purposes of subsections 110.1(6) and 118.1(16) of the Act in the event the property used by the donor or person not dealing at arm's length with the donor is returned (or repaid) to the donee.

Locations of other summaries		Wordcount
Tax Topics - Income Tax Act - Section 110.1 - Subsection 110.1(6)	there can be multiple counting of loans for purposes of reducing a gift amount under ss. 118.1(16) and 110.1(6)	135

Subsection 118.1(17)

Administrative Policy

18 July 2022 Internal T.I. 2021-0921671I7 - Loanbacks and the application of 118.1(17)

CRA can choose which gifts to apply loanbacks

A corporation (the donor) made charitable gifts in 2007, as well as in 2015 to 2017, to a registered charity (a private foundation). Interest-bearing loans were made in 2012 and 2015, by the foundation to the donor and to persons not dealing at arm’s length with the donor, resulting in the use of the foundation’s property to which s. 118.1(16)(c)(ii) applied.

The Directorate confirmed that, pursuant to the ordering rules in s. 118.1(17), the fair market value (FMV) of the gifts made in 2015 to 2017 could be reduced by the outstanding amounts of the loans made in 2012 and 2015 if no loan amount had been applied under s. 118.1(16) to reduce the FMV of the 2007 charitable gifts. After noting that by virtue of s. 110.1(6), ss. 118.1(16) and (17) apply to corporate gifts, the Directorate stated:

[S]ubsection 118.1(17) of the Act does not restrict any portion of a property described in subparagraph 118.1(16)(c)(ii) of the Act, that has not been applied to reduce the FMV of a previous gift, from being applied to reduce the FMV of a gift made in a subsequent year. For example, in the situation you describe, at each particular time the 2007 and 2015 to 2017 gifts were made, the conditions of subparagraph 118.1(16)(c)(ii) of the Act were present with respect to the loans made in 2012, but no portion of such loans was applied to reduce the FMV of the charitable gifts made to the private foundation in 2007. In such situation, the FMV of the unpaid amount of such loans, at each particular time the charitable gifts were made in 2015 to 2017, can be applied to reduce the FMV of those gifts, pursuant to subsections 118.1(16) and 118.1(17) of the Act.

11 May 2009 External T.I. 2009-0307941E5 - Back to Back Loans provisions

s. 118.1(17) applies to each of multiple NAL donors even if loan-back is to only one donor

2009-0307941E5 dealt with two donors (not dealing with each other at arm’s length) who each made a cash gift to the same donee, and with one of the donors using part of the gift (as a result of the loan-back to it of gifted cash) as described in s. 118.1(16)(c)(ii). This resulted in a reduction not only in the amount of the gift made by that donor, but also by the other. CRA stated:

Subsection 118.1(17) of the Act applies on a taxpayer by taxpayer basis and as such, where multiple individuals gift to a qualified donee and a person with which these individuals do not deal at arm's length uses property of the donee and the property was not used in the carrying on of the donee's charitable activities, the provision will be applied to each donor separately. Accordingly where two donors, who do not deal at arm's length with each other, each make a gift of cash to a charity and an amount is loaned back by the charity to one of the donors, the amount of the loan appears to be taken into account in determining the deemed fair market value of the gift made by each of the donors. We have brought this result to the attention of the Department of Finance … .

…[T]he Act does not provide for the reinstatement of a gift … in the event the property used by the donor or person not dealing at arm's length with the donor is returned to the charity.

Finance

6 October 2017 APFF Financial Strategies and Instruments Roundtable, Q.15

no plan to address double recognition of a loanback benefit under s. 118.1(16)

2009-0307941E5 dealt with two donors (not dealing with each other at arm’s length) who each made a cash gift to the same donee, and with one of the donors using part of the gift (as a result of the loan-back to it of gifted cash) as described in s. 118.1(16)(c)(ii). This resulted under s. 118.1(17) in a reduction not only in the amount of the gift made by that donor, but also by the other. What are the policy considerations in this situation? Finance responded:

The reduction in the value of a gift is calculated on an individual basis for each taxpayer. This means that if two or more persons not dealing at arm’s length make a donation to the same charity, the use of the property donated by one of them will reduce the value of each one's gift, even if one of them does not use the property. These provisions clearly evince a demarcation between a property owned and used by a charity and a property owned and used by a donor. Adding a rule to apportion the reduction in the value of the gift would add a great deal of complexity to the tax rules surrounding charitable giving while opening the door to new opportunities for abuse of the provisions of the ITA.

Where the value of a gift is reduced as a result of the application of subsections 118.1(16) and (17), and the property donated is subsequently returned to the donee, the value of the gift is not restored. The addition of such a rule could create problems where the use of the property alternates between the donor and the donee. In such circumstances, it would be necessary to constantly monitor the use of the property that was donated to a registered charity.

...[I]n general, a reduction in the value of a gift in a situation involving several persons not dealing at arm's length, or the absence of a rule to restore the value of a gift that has previously been reduced, are not inconsistent with the objective of preventing taxpayers from obtaining benefits from gifts made to a qualified donee.

Subsection 118.1(18) - Non-qualifying security defined

Administrative Policy

21 March 2007 External T.I. 2005-0142121E5 F - Don au décès d'un contribuable

gift of shares to a charity is not of non-qualifying securities if immediately after the ownership transfer, the estate now deals at arm's length with the corporation

Mr. X and Mrs. X are married under the community of property regime and Mr. X is the sole shareholder of Realty Co. If Mr. X survives Mrs. X, all of the shares in Realty Co would be left under his will to a registered charity, whereas if she survives him and accepts the community (and refuses the will), 50% of the Realty Co shares would be her property, with the remaining 50% left by Mr. X to a registered charity.

In the course of a general discussion, CRA stated:

[I]f immediately after the time of transfer of ownership of the shares of a corporation to the charity, the estate no longer controls and does not deal at arm's length with the corporation, the shares would not be non-qualifying securities to the deceased individual. Pursuant to the provisions of subsection 118.1(5), the deceased individual may therefore be entitled to a deduction in computing the individual’s tax payable under subsection 118.1(3) for the taxation year of death.

Locations of other summaries		Wordcount
Tax Topics - Income Tax Act - Section 118.1 - Subsection 118.1(5)	bequest of shares to spousal trust, with the shares then directed to a registered charity on the spouse’s is treated as a gift of an equitable trust interest by the deceased	246

May 1998 Conference for Advance Life Underwriting Round Table, Q. 13, No. 9807000

The provisions of ss.118.1(18)(a) and (b) will not be applicable where father, who owns all the shares of Holdco together with a promissory note issued by Holdco, with Holdco holding a promissory note issued by Opco whose common shares are owned by father's children and whose voting redeemable preferred shares are owned by Opco, donates the shares and note of Holdco to a registered charity; however, GAAR may be an issue if it can reasonably be concluded that the real gift to the charity is the promissory note of Opco.

May 1998 Conference for Advance Life Underwriting Round Table, Q. 12, No. 9807000

A remainder interest in a charitable reminder trust is not a security described in any of paragraphs (a) to (c) in the definition of "non-qualifying security".

Subsection 118.1(19) - Excepted gift

Administrative Policy

19 June 2015 STEP Roundtable, Q. 12

testamentary gift of shares which are non-qualifying securities to public foundation not excepted

Given that s. 118.1(5)(a) provides that a testamentary gift made to a public foundation is deemed to be made by the estate, will such a gift of unlisted shares which are non-qualifying securities be an "excepted gift" under s. 118.1(19)?

CRA responded that as the estate typically will be a "personal trust" under the s. 248(1) definition and, under s. 251(1)(b), a personal trust generally will be deemed not to deal at arm's length with a person which is beneficially interested in it then, assuming that the public foundation is a beneficiary of the estate, the estate will be deemed not to deal at arm's length with the foundation. Accordingly, the gift of the shares, which are non-qualifying securities as defined in s. 118.1(18), will not qualify as an "excepted gift" under s. 118.1(19).

Subsection 118.1(26)

Administrative Policy

31 March 2017 External T.I. 2016-0630351E5 - Return of a gift

return of gift made 35 years ago

In 1981, the taxpayer gifted a whole life insurance policy to a charitable foundation that raises funds for a specific college on condition that the funds be used by the college for scholarships in a specific program, which now no longer exists. The taxpayer has contacted the foundation, requesting a return of the policy, which the foundation is prepared to consider. Before turning to the potential negative impact on the foundation if it did so, CRA stated:

Where a registered charity or other qualified donee returns a gift to a donor, there are rules in the Act to ensure that the donor cannot improperly retain tax assistance in the form of a charitable donation tax credit or deduction in respect of the transfer of property. These rules address situations where a transfer of property was not a gift at law and an official tax receipt had been issued by the qualified donee, as well as situations where a transfer of property was a gift at law and nevertheless has been returned. …

Where the original property is returned, the taxpayer is deemed not to have disposed of the property nor to have made a gift. If the returned property is not the original property, the original disposition will not be recognized but the taxpayer will be considered to have disposed of the original property at the time the returned property is transferred to the taxpayer for deemed proceeds of disposition. The taxpayer’s tax return may be reassessed to the extent that the reassessment relates to the transfer (such as the disallowance of the charitable donations tax credit or deduction or to address the disposition of the original property).

Locations of other summaries		Wordcount
Tax Topics - Income Tax Act - Section 149.1 - Subsection 149.1(1) - Charitable Foundation	gift potentially could be returned by charity pursuant to a condition subsequent	169
Tax Topics - Income Tax Act - Section 110.1 - Subsection 110.1(15)	return of gift made 35 years previously by charity	286

Locations of other summaries		Wordcount
Tax Topics - Income Tax Act - Section 104 - Subsection 104(6)	no s. 104(6) deduction for testamentary gift distributed to charity and deducted under s. 118.1(5)	320
Tax Topics - Income Tax Act - Section 248 - Subsection 248(28)	estate could not claim both a credit in deceased’s return and deduction under s. 104(6) for donation to charity	91

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Section 118.1

Table of Contents

Subsection 118.1(1) - Definitions

Right to Receive Production

Articles

R. Ashton, "Leasing: Recent Developments", 1997 Corporate Management Tax Conference Report, c. 11.

Total Charitable Gifts

Cases

Van der Steen v. Canada, 2020 FCA 168

Morrison v. Canada, 2020 FCA 93

Markou v. Canada, 2019 FCA 299

French v. Canada, 2016 FCA 64

Canada v. Castro, 2015 DTC 5113 [at at 6266], 2015 FCA 225, rev'g sub nom. David v. The Queen, 2014 DTC 1111 [at 3236], 2014 TCC 117

Canada v. Berg, 2014 DTC 5028 [at at 6664], 2014 FCA 25, rev'g infra

Kossow v. Canada, 2014 DTC 5017 [at at 6622], 2013 FCA 283

Maréchaux v. Canada, 2010 DTC 5174 [at at 7315], 2010 FCA 287, aff'g 2009 DTC 1379 [at 2095], 2009 TCC 587

Slobodrian v. Canada (Minister of National Revenue), 2006 DTC 5625, 2005 FCA 336

Canada v. Doubinin, 2005 DTC 5624, 2005 FCA 298

Canada (Attorney General) v. Nash, 2005 DTC 5696, 2005 FCA 386

Slobodrian v. Canada (Minister of National Revenue), 2003 DTC 5632, 2003 FCA 350

Woolner v. Canada (Attorney General), 99 DTC 5722 (FCA)

The Queen v. Friedberg, 92 DTC 6031, [1992] 1 CTC 1 (FCA)

The Queen v. Burns, 88 DTC 6101, [1988] 1 CTC 201 (FCTD), aff'd 90 DTC 6335 (FCA)

The Queen v. McBurney, 85 DTC 5433, [1985] 2 CTC 214 (FCA)

The Queen v. Zandstra, 74 DTC 6416, [1974] CTC 503 (FCTD)

See Also

Tudora v. The Queen, 2020 TCC 11 (Informal Procedure)

Miller v. The Queen, 2019 TCC 204 (Informal Procedure)

Kaul v. The Queen, 2019 TCC 17

Morrison v. The Queen, 2018 TCC 220, aff'd sub nom. Eisbrenner v. Canada, 2020 FCA 93

Markou v. The Queen, 2018 TCC 66, aff'd on selected grounds 2019 FCA 299

Murji v. The Queen, 2018 TCC 7 (Informal Procedure)

Fonds de solidarité des travailleurs du Québec (F.T.Q) v. The Queen, 2018 TCC 3, aff'd on s. 18(1)(a) grounds 2019 FCA 36

Cassan v. The Queen, 2017 TCC 174

Mariano v. The Queen, 2015 DTC 1209 [at at 1331], 2015 TCC 244

French v. The Queen, 2015 TCC 35

Webb v. The Queen, 2004 TCC 619 (Informal Procedure)

Johnson v. The Queen, 2014 DTC 1097 [at at 3185], 2014 TCC 84 (Informal Procedure)

David v. The Queen, 2014 DTC 1111 [at at 3236], 2014 TCC 117 (Informal Procedure)

Carson v. The Queen, 2014 DTC 1006 [at at 2520], 2013 TCC 353 (Informal Procedure)

Hall v. The Queen, 2013 DTC 1241 [at at 1313], 2013 TCC 314 (Informal Procedure)

Bandi v. The Queen, 2013 DTC 1192 [at at 1032], 2013 TCC 230 (Informal Procedure)

Berg v. The Queen, 2013 DTC 1018 [at at 93], 2012 TCC 406, rev'd supra

Grossett v. The Queen, 2012 DTC 1185 [at at 3465], 2012 TCC 179 (Informal Procedure)

Coleman v. The Queen, 2010 DTC 1096 [at at 3000], 2010 TCC 109, aff'd 2011 DTC 5040 [at 5651], 2011 FCA 82

Russell v. The Queen, 2009 TCC 548, 2009 DTC 1371 (Informal Procedure)

Benquesus v. The Queen, 2006 DTC 2747, 2006 TCC 193

Klotz v. The Queen, 2004 DTC 2236, 2004 TCC 147, aff'd 2005 DTC 5279, 2005 FCA 158

Nadeau v. The Queen, 2003 DTC 18 (TCC)

Dutil v. The Queen, 95 DTC 281 (TCC)

Administrative Policy

Background

Proposed transactions

Purpose of proposed transactions

Ruling

P113 – "Gifts and Income Tax" 2013

CPC-012 Out-of-pocket expenses December 3, 1997 (Revised April 28, 2009)

3 December 2003 External T.I. 2003-001859

CPC-017 Gift of Services 29 March 2000

21 September 1994 External T.I. 5-94149

12 January 1993 T.I. 922833 (November 1993 Access Letter, p. 506, ¶C117-208; Tax Window, No. 28, p. 28, ¶2368)

14 July 1992 External T.I. 5-921248

24 March 1992 T.I. (March 1993 Access Letter, p. 76, ¶C109-126; Tax Window, No. 18, p. 24, ¶1827)

12 March 1992 T.I. and 13 March 1992 Memorandum (Tax Window, No. 17, p. 10, ¶1802)

9 October 1991 T.I. (C.T.O. Fax Service Doc. No. 233; Tax Window, No. 11, p. 18, ¶1514)

September 1991 T.I. 1991-92 [FMV excludes GST]

26 August 1991 T.I. (Tax Window, No. 8, p. 20, ¶1413)

10 April 1991 Memorandum (Tax Window, No. 2, p. 24, ¶1191)

25 February 1991 T.I. (Tax Window, Prelim. No. 3, p. 28, ¶1125)

88 C.R. - F.Q.2

81 C.R. - Q. 38

IT-86R "Vow of Perpetual Poverty".

IT-226R "Gift to a Charity of a Residual Interest in Real Property or an Equitable Interest in a Trust".

Articles

Blake Bromley, "Flaunting and Flouting The Law of Gift: Canada Customs and Revenue Agency's Philanthrophobia", Estates Trusts and Pensions Journal, Vol. 21 No. 3, June 2002, p. 177.

Ghosh, Robson, "Charity and Consideration", British Tax Review, 1993, No. 6, p. 496: Discussion of the concept of no consideration.

Paragraph (c)

Administrative Policy

Subparagraph (c)(i)