Split receipting

Split receipting is the method used to calculate the eligible amount of a gift for receipting purposes when the donor has received an advantage (consideration) in return for his or her donation.

To figure out the eligible amount of the gift, a charity has to subtract the fair market value (FMV) of the advantage from the FMV of the gift.

Criteria for split receipting

  • Where a donor receives an advantage in exchange for a gift, a charity must be able to come up with an accurate figure for the FMV of that advantage.
     
  • The gift, minus the advantage, still has to constitute a voluntary transfer of property and meet the intention to make a gift threshold.

What is the intention to make a gift threshold?

When the FMV of an advantage received for a gift is more than 80% of the FMV of the gift itself, the Canada Revenue Agency (CRA) generally considers that there is no true intention to make a gift. Therefore, a charity cannot issue a receipt.

Example 

An individual donates $100 to a charity and in return receives a ticket to an art exhibit valued at $50.

FMV of gift

$100

FMV of advantage (ticket received by donor)

$  50

Intention to make a gift threshold (80% of FMV of gift) 

$  80

Since the FMV of the advantage received by the donor ($50) falls within the intention to make a gift threshold ($80) the charity can issue a receipt.

If the FMV of the advantage had been $81 or more, the intention to make a gift threshold would not have been met and the charity could not issue a receipt.

Sometimes, although not very often, the intention to make a gift threshold has not been met but there was a clear intention to make a gift. In these cases, the donor must be able to prove to the CRA that they intended to make a gift.

Understanding the de minimis rule

Certain advantages are of nominal value, and are considered too minimal to affect the value of a gift.

Advantages that have a combined FMV that is not more than $75 or 10% of the FMV of the gift, whichever is less, are considered too minimal to affect the amount of the gift. A charity does not have to subtract these advantages from the FMV of the gift when issuing receipts.

Example

An individual donates $100 to a charity and in return receives a mug valued at $6 and a pen valued at $2.

FMV of gift $100
Combined value of advantages $    8
De minimis threshold (lesser of $75 or 10% of value of gift) $  10

Since the combined value of the advantages ($8) is less than the de minimis threshold ($10), the charity does not need to subtract these advantages from the value of the gift when issuing the receipt.

If the FMV of the advantages had been $11 or more, the charity would have to subtract the advantages from the value of the gift when issuing the receipt.

In addition, if the FMV of the advantages had been more than $80 (80% of the FMV of the gift), the intention to make a gift threshold would not have been met and the charity could not issue a receipt.

The de minimis rule does not apply to cash or near-cash equivalents (for example, redeemable gift certificates, vouchers, and coupons). A charity must always subtract these items from the FMV of the gift.

Related Topics

References

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