Chapter History

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

Introduction

The purpose of a Chapter History page is to highlight any amendments to the information contained in an interpretation bulletin and income tax technical news that is now reflected in a chapter of an income tax folio as well as to identify any subsequent amendments to a folio chapter. It outlines amendments that have been made as a result of legislative changes and proposed legislative changes, precedential court decisions, as well as new or revised interpretations of the Canada Revenue Agency (CRA).

Except as otherwise noted, all statutory references herein are references to provisions of the Income Tax Act , R.S.C., 1985, c.1 (5th Supp.), as amended and all references to a Regulation are to the Income Tax Regulations, C.R.C., c. 945, as amended.

Update November 8, 2016

General

Income Tax Folio S7-F1-C1, Split-receipting and Deemed Fair Market Value replaces and cancels Interpretation Bulletin IT-110R3, Gifts and Official Donation Receipts and Income Tax Technical News No. 26 (ITTN 26).

Information on gifts of cultural property and ecological gifts (formerly ¶2 of IT-110R3) can be found in Pamphlet P113, Gifts and Income Tax.

Information formerly included in ¶13 - 15 of IT-110R3 can be found on the CRA website on the page entitled Receiving gifts. Information on official donation receipts (formerly ¶16 - 22 of IT-110R3) can be found on the CRA website on the page entitled Issuing receipts.

In addition to consolidating the content of the former interpretation bulletin and income tax technical news, general revisions have been made to improve readability. Any substantive technical and interpretive changes to the information outlined in the former interpretation bulletin and income tax technical news are described below.

Legislative and other changes

Throughout this Chapter, references are made to a qualified donee, as defined in subsection 149.1(1) (as amended by S.C. 2015, c. 36, s. 18(1), S.C. 2012, c. 19, s. 7(2) and S.C. 2011, c. 24, s. 52(1)). The definition lists the types of recipients (such as a registered charity) that are eligible to issue official receipts for the purposes of the charitable donation deduction or the charitable donation tax credit, as applicable.

ITTN 26 announced the withdrawal of an administrative position regarding charitable annuities issued after December 20, 2002 which had no basis in law. Accordingly, the comparative example on charitable annuities described in ITTN 26 was not reproduced in this Chapter. 

¶1.2 and 1.3 (formerly ¶3 of IT-110R3) are added to discuss the common law and the civil law meanings of the term gift.

¶1.5 is added to describe the circumstances where a transfer of property will not necessarily be disqualified from being a gift as provided for in subsection 248(30). The paragraph reflects a legislative amendment made by S.C. 2013, c. 34, s. 358(30) which added subsection 248(30), applicable in respect of gifts made after December 20, 2002.

¶1.6 is added to explain that the rule in subsection 248(30) does not apply to inter-charity transfers as provided for in subsection 248(40), which was added by S.C. 2013, c. 34, s. 358(30), applicable in respect of gifts made after November 8, 2006.

¶1.7 and 1.8 are added to provide the definition of the eligible amount of a gift which is found in subsection 248(31). The paragraphs reflect a legislative amendment made by S.C. 2013, c. 34, s. 358(30) which added subsection 248(31), applicable in respect of gifts made after December 20, 2002.

¶1.9 - 1.11 are added to provide the definition of the amount of the advantage which is found in subsection 248(32). The paragraphs reflect a legislative amendment made by S.C. 2013, c. 34, s. 358(30) which added subsection 248(32). The amendment is generally applicable for gifts made on or after December 20, 2002 and applies with respect to all gifts made at or after 6:00 p.m. Eastern Standard Time on December 5, 2003. A modified version of the phrase applied, in limited circumstances, to gifts made after December 20, 2002 and before 6:00 p.m. Eastern Standard Time on December 5, 2003.

¶1.14 - 1.22 (formerly included in ¶4 - 9 of IT-110R3 and in the discussion of Fundraising Events or Activities in ITTN 26) are now supplemented with Examples 1 - 4 to provide general guidance on determining the amount of advantage and eligible amount of a gift with respect to common fundraising situations. The example for Concerts, Shows and Sporting Events previously included in ITTN 26 was determined to be similar to Example 1 and therefore not reproduced in this Chapter.

¶1.23 is added to provide the CRA’s general view on donor recognition when determining the amount of the advantage in respect of a gift.

¶1.25 is added to provide information on the cost of a property that is received as an advantage in respect of a gift as provided for in subsection 248(33). The paragraph reflects a legislative amendment made by S.C. 2013, c. 34, s. 358(30) which added subsection 248(33), applicable in respect of gifts made after December 20, 2002.

¶1.26 - 1.28 and related Example 5 are added to explain the deemed fair market value rule in subsection 248(35). The paragraphs reflect a legislative amendment made by S.C. 2013, c. 34, s. 358(30) which added subsection 248(35), applicable in respect of gifts made at or after 6:00 p.m. Eastern Standard Time on December 5, 2003. A legislative amendment to subsection 248(35) was made by S.C. 2013, c. 34, s. 358(31), applicable in respect of gifts made on or after October 24, 2012.

¶1.29 - 1.32 are added to explain the exceptions to the deemed fair market value rule in subsection 248(35). The paragraphs reflect a legislative amendment made by S.C. 2013, c. 34, s. 358(30) which added subsection 248(37). Subsection 248(37) is generally applicable in respect of gifts made on or after 6:00 p.m. Eastern Standard Time on December 5, 2003, with a transitional rule that excludes certain gifts to private foundations made after that time and before March 18, 2007 from the application of subsection 248(35). Subsection 248(37) was amended by S.C. 2014, c. 20, s. 30(2), to provide that this subsection will not apply to a cultural property that was acquired by the taxpayer as part of a gifting arrangement that is a tax shelter, applicable in respect of gifts made after February 10, 2014.

¶1.33 is added to discuss the deeming rule in subsection 248(36) which applies to a gift of property that was acquired from a non-arm's-length person. This paragraph reflects a legislative amendment made by S.C. 2013, c. 34, s. 358(30) which added subsection 248(36) to the Act, applicable in respect of gifts made on or after July 17, 2005.

¶1.34 is added to discuss the deeming rule in subsection 248(38) applicable in circumstances where a taxpayer enters into transactions designed to circumvent subsection 248(35). This paragraph reflects a legislative amendment made by S.C. 2013, c. 34, s. 358(30) which added subsection 248(38), applicable in respect of gifts made on or after 6:00 p.m. Eastern Standard Time on December 5, 2003. A modified version of subsection 248(38) applied for gifts made on or after 6:00 p.m. Eastern Standard Time on December 5, 2003 and before July 18, 2005.

¶1.35 is preceded by a notice that discloses a proposed legislative change contained in Bill C-29, introduced on October 25, 2016, in respect of certain measures in the March 22, 2016 federal budget that will reclassify eligible capital property as depreciable property effective January 1, 2017.

¶1.35 - 1.38 and related Example 6 are added to explain the tax implications of a substantive gift as provided for in subsection 248(39). These paragraphs reflect a legislative amendment made by S.C. 2013, c. 34, s. 358(30) which added subsection 248(39), applicable in respect of gifts made after February 26, 2004.

¶1.39 is added to describe the expression limited-recourse debt in respect of a gift in subsection 143.2(6.1) and the term limited-recourse amount as defined in subsection 143.2(1). This paragraph reflects a legislative amendment made by S.C. 2013, c. 34, s. 293(1) which added subsection 143.2(6.1), applicable in respect of gifts made after February 18, 2003.

¶1.40 is added to provide information on the tax implications of repaying debt that previously reduced the eligible amount of a gift as stipulated in subsection 248(34). This paragraph reflects a legislative amendment made by S.C. 2013, c. 34, s. 358(30) which added subsection 248(34), applicable in respect of gifts made after February 18, 2003.

¶1.41 is added to discuss the rule in subsection 248(41) that applies when a taxpayer fails to provide relevant information to a qualified donee before an official receipt is issued. This paragraph reflects a legislative amendment made by S.C. 2013, c. 34, s. 358(30) which added subsection 248(41), applicable in respect of gifts made after 2005.

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