Limitations on claim amount of gift

The amount of the gift(s) that may be claimed on the deceased final return for purposes of the tax credit must be the lesser of:

• the eligible amount of the gift(s) made in the year of death (For deaths that occurred before 2016, this includes gifts made by will and designation donations. For deaths that occurred after 2015, this may include gifts made by a GRE or a former GRE), plus the unclaimed portion of the eligible amount of any gifts made in the five years before the year of death; and
  
• 100% of the deceased's net income (Line 236) on the return.

For a gift of property made to a qualified donee, special rules may apply to limit the fair market value (FMV) of the property gifted, which limits the eligible amount of the gift that can be used in computing the donation tax credit amount. When the rules apply, the FMV of the donated property will be deemed to be the lesser of the property's:

• FMV otherwise determined; and
  
• cost (or its adjusted cost base (ACB) if it is capital property), at the time the gift was made.

The limitation on the eligible amount of a gift will apply where:

• the donated property was acquired as part of a gifting arrangement that is a tax shelter, or
  
• the property is being gifted otherwise than as a consequence of the taxpayer's death, and the property was acquired less than 3 years, or in some cases, less than 10 years, before making the gift.

The limitation on the eligible amount of a gift will not apply to gifts of:

• inventory;
  
• real property or an immovable property located in Canada;
  
• certified cultural property (unless it was gifted after February 10, 2014, and was acquired as part of a gifting arrangement that is a tax shelter);
  
• ecologically sensitive land (including a covenant, an easement, or in the case of land in Quebec, a real servitude);
  
• a share, debt obligation, or right listed on a designated stock exchange;
  
• a share of the capital stock of a mutual fund corporation;
  
• a unit of a mutual fund trust;
  
• an interest in a related segregated fund trust;
  
• a prescribed debt obligation;
  
• shares of controlled corporations in certain circumstances; or
  
• property acquired by a corporation in certain circumstances where the property was acquired under a tax-deferred rollover.

There are also special anti-avoidance rules that may apply where a taxpayer has attempted to avoid the application of the limitation rules discussed above. For more information, see the Pamphlet P113, Gifts and Income Tax.

If the property was acquired as part of a gifting arrangement that is a tax shelter, the eligible amount will be reported in box 13 of Form T5003, Statement of Tax Shelter Information.

Sometimes, a capital property may be gifted. At the time the property is gifted to a qualified donee, its FMV may be more than its ACB.

When the fair market value (FMV) is more than the adjusted cost base (ACB), you may designate an amount that is less than the FMV to be the proceeds of disposition. This may allow you to reduce the capital gain otherwise calculated. If you choose to designate an amount that is less than the FMV as the amount to be used as the proceeds of disposition, this will be the eligible amount of the donation. You can choose to designate an amount that is not greater than the FMV and not less than the greater of:

• any advantage in respect of the gift; and
  
• the ACB of the property (or, where the property was depreciable property, the lesser of its ACB and the undepreciated capital cost of the class of the property), at the time you made the donation.

Treat the amount you choose as the proceeds of disposition when you calculate any capital gain.

For more information about charitable donations and the special rules that may apply, see Line 349 and the Pamphlet P113, Gifts and Income Tax.

Forms and publications

• General Income Tax and Benefit Guide
• Guide T4011, Preparing Returns for Deceased Persons
• Schedule 9, Donations and Gifts
• Pamphlet P113, Gifts and Income Tax
• Form T5003, Statement of Tax Shelter Information
• IT110, Gifts and Official Donation Receipts

Date modified:

2017-01-04