Receipting FAQs

Receipting - Frequently Asked Questions

This area of our site is devoted to Frequently Asked Questions on issuing proper tax donation receipts. You will find a detailed and up-to-date catalogue of commonly asked questions and answers, with additional links for more information. You can move around the FAQs by choosing from the six (6) main question areas listed in the left hand menu under FAQs.

If you have a question that you don't see answered here, please send us an e-mail at [email protected] and we will do our best to respond as soon as possible.

  1. Gifts – General
  2. Receipting – The Basics
  3. Determining Eligible Amounts
  4. Issuing Receipts
  5. Enduring Property



Gifts - General

G1. What are the essential elements of a gift or donation?

G1. What are the essential elements of a gift or donation?


Short answer

A gift must contain:

A Voluntary
Transfer
Of Property
given of one's free will; the donor must not be obliged to part with the property, for instance as the result of a contract or a court order by a donor to a Registered Charity or other qualified donee either in the form of cash or a gift-in-kind; services are not property and therefore are not considered gifts

Generally, a donor transfers the property to the charity without expecting anything in return.

Long answer

A transfer of property for which a donor receives an advantage is still considered a gift for the purposes of the Income Tax Act as long as the transfer of property was made with the Intention to Make a Gift. When the donor receives an advantage, an official donation receipt can still be issued using the concept of "split receipting".

G2. What transactions or donations generally do not qualify as gifts?

G.2 What transactions or donations generally do not qualify as gifts?


Short answer

The following are examples of items that do not qualify as cash gifts or gifts-in-kind:

  • a court ordered transfer of property to a charity;
  • the payment of a basic fee for admission to an event or to a program (for example, fees for daycare of nursery school);
  • the payment of membership fees that convey the right to attend events, receive literature, receive services, or be eligible for entitlements of any materials value that exceed 80 per cent of the value of the payment (membership fees are considered gifts if they confer no more than the right to vote at a meeting and receive reports of the charity's activities - unless such reports are otherwise available for a fee.);
  • the purchase of a lottery ticket or other chance to win a prize, even though the lottery proceeds may benefit one or more charities;
  • the payment of tuition fees (except as permitted by Information Circular 75-23, Tuition Fees and Charitable Donations Paid to Privately Supported Secular and Religious Schools as seen in Tuition Fees and Charitable Donations Paid to Privately Supported Secular and Religious Schools
  • the purchase of goods or services from a charity;
  • a donation for which the fair market value of the advantage or consideration provided to the donor exceeds 80 per cent;
  • a gift in kind for which the fair market value cannot be determined;
  • contributions provided in exchange for advertising and/or sponsorship;
  • gifts of services (for example, donated time, skills, or labour); a charity can, however, pay for services rendered and later accept the return of all or a portion of the payment as a gift, provided it is returned voluntarily;
  • items of little or only nominal value, such as used clothing, hobby crafts or home baking;
  • promises of goods or services for redemption in future (for example, gift certificates) donated by the issuer or hotel accommodation);
  • pledges;
  • loans of property;
  • use of a timeshare;
  • the lease of premises;
  • a donation subject to a direction by the donor (for example, that the charity transfer the funds to specified persons or that the charity give the funds to a non-qualified donees.
More…

Visit What is a gift?

G3. What is a "gift-in-kind"?

G3. What is a "gift-in-kind"?


Short answer

A gift-in-kind is a gift of property other than cash. It includes numerous types of property, in particular inventory, capital property, and depreciable property. Donations of real estate, stocks and bonds, and personal items are all considered gifts-in-kind.

Items of little value, such as hobby crafts or home baking, do not qualify as gifts-in-kind for the purposes of issuing a tax receipt.

A charity that receives a gift-in-kind can issue a tax receipt for the eligible amount of the gift.

More…

For more information on gifts-in-kind, see Interpretation Bulletin IT-297
Gifts in Kind to Charity and Others
.

G4. Can our Charity return a gift to a donor?

G4. Can our Charity return a gift to a donor?


Short answer

In most cases, a charity cannot return a gift. Based on the law, a gift transfers ownership from the donor to the charity. Once the transfer is made, the charity’s governing documents oblige it to use the gift in carrying out its charitable purposes.

Generally, a court application is required to alter use of a donation from the purpose originally intended. If a charity is requested, or decides itself, to return a donation, it should ensure that it has the legal authority to do so.

Exception
A charity may have among its purposes the provision of assistance to other Registered Charities. If so, it may decide to transfer the gifted property to another qualified charity. As a courtesy, some charities seek a donor’s input before making such a transfer.

A charity is occasionally obliged by law to return gifts to donors. This can happen, for example, when a charity asks the public to contribute to a special project and later events make it impossible to carry out the project. Under common law, ownership of the property can revert to the donors if the project becomes impossible to fulfill.


Examples of exceptions

Assume a charity holds an fundraising appeal for a specific group of people. The project would be impossible to complete if the people died before the charity could mount its relief effort.

Assume a charity raises funds to build a new hospital wing. If the government closes the hospital, the charity would be unable to pursue its goal.

 

Long answer

When a gift is returned to the donor, an amended tax receipt needs to be issued and the donor may have to amend the tax return on which credit for the donation was claimed.

To avoid having to return donations, when your Charity is seeking funds for a special project, it can clearly state to potential donors what it will do with the money in the event that the project cannot be carried out or more money is collected than the project requires. For example, you can say that you will apply any unused donations to your other programs.

More information:

On October 19, 2012, CRA released a new guidance concerning the return of a gift to a donor titled CG-016 Consequences of Returning Donated Property (the “Guidance”).

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G5. Can our charity give the donors something in return for their gifts?

G5. Can our Charity give the donors something in return for their gifts?


Short answer

Yes, a charity can give a token of appreciation. This token is called a “consideration” or "advantage.” Examples of advantages include pens, mugs, T-shirts, and books.

If your Charity gives a token of appreciation, the amount of the gift that appears on the official donation receipt may have to be reduced by the amount of the advantage. This is known as "split receipting”. A charity must determine the Fair Market Value of the advantage to the donor, regardless of the item’s actual cost to the charity.

Once the fair market value is determined, the charity will have to apply the de-minimis rule to determine if the advantage is “big” enough to be included in calculating the eligible amount on the receipt. If the fair market value of the advantage is minimal, the value of the donation does not have to be reduced.

Receipting - The Basics

Receipting - The Basics

This section of Frequently Asked Questions covers The Basics about issuing proper tax donation receipts such as: what are official donation receipts and who can issue them? / what information should be included on an official donation receipt / and how to handle receipting mistakes.  There are twenty questions divided into three sections:

  1. General Information about Receipts

  2. Format and Required Information

  3. Improper Receipting

Remember: You can move around the FAQs by choosing from the six (6) main question areas listed in the left hand menu under FAQs or you can use the Search box found in the top right corner of every page.

General Information About Receipts

R1. What is an "official" donation receipt?

R1. What is an "official" donation receipt?


Short Answer

An official donation receipt is a receipt issued by charities, and other qualified donees, that are registered with the Canada Revenue Agency’s Charities Directorate, for gifts received.

More…

Certain details need to be included on an official donation receipt.
See Receipting: The Basics FAQ R5

R2. Who can issue official donation receipts?

R2. Who can issue official donation receipts?


Short answer

All qualified donees may issue official donation receipts for gifts received from individuals and corporations.

More…

Under the Income Tax Act, however, there is no requirement that a registered charity issue receipts for gifts received.

R3. Who are qualified donees?

R3. Who are qualified donees?


Short answer

Under the Income Tax Act, qualified donees are organizations that can issue official donation receipts for gifts that individuals and corporations make to them.

Examples

Qualified donees include

  • registered charities;
  • registered Canadian amateur athletic associations;
  • registered national arts service organizations;
  • housing corporations in Canada set up exclusively to provide low-cost housing for the aged;
  • municipalities in Canada;
  • under proposed legislation, for gifts made after May 8, 2000, municipal or public bodies performing a function of government in Canada;
  • the United Nations and its agencies;
  • universities outside Canada with a student body that ordinarily includes students from Canada;
  • charitable organizations outside Canada to which the government of Canada has made a gift during the donor’s taxation year or in the 12 months immediately before that period;
  • the government of Canada, a province, or territory;

R4. Our charity was officially registered on March 1, 2008. When can we start issuing official donation receipts?

R4. Our charity was officially registered on March 1, 2008. When can we start issuing official donation receipts?


Short answer

It depends on the kind of gift. Your charity can issue receipts for gifts-in-kind as of your effective date of registration. In the case of cash gifts, you can issue receipts as of the year of registration. (CPC 009)

Example

As stated, your organization’s effective date of registration is March 1, 2008. If you received a gift-in-kind on January 12, 2008, a receipt cannot be issued for the gift, since it was received prior to your effective date of registration. If the gift were a cash donation, you would be able to issue an official receipt as of January 1, 2008.

Long Answer

On the official donation receipt, your charity must enter the date on which the gift was received. A registered charity cannot issue an official donation receipt for a gift-in-kind received prior to its effective date of registration.

R5. What does our charity need to know before we issue an official donation receipt?

R5. What does our charity need to know before we issue an official donation receipt?


Short answer

You need to know the following:

  • Is this gift eligible for a tax receipt?
    • If so, what is the fair market value of the property transferred?

  • Has the donor received something in return for the gift? This is known as an "advantage".
    • If so, what is the eligible amount to be receipted?

R6. Does our charity always have to issue official donation receipts for donations?

R6. Does our charity always have to issue official donation receipts for donations?


Short answer

No. Under the Income Tax Act, a registered charity is not required to issue receipts for gifts received.

Long answer

Remember that donors cannot claim a charitable tax credit or deduction unless they have an official donation receipt. Therefore, if your charity does not issue receipts, you should let potential donors know.

Similarly, if your charity only sometimes issues receipts, you should let potential donors know of the circumstances in which you will and will not issue a receipt.

R7. How does our charity determine whether to issue official donation receipts?

R7. How does our charity determine whether to issue official donation receipts?


Short answer

Generally, the main consideration is cost.

Long answer

Receipting carries with it a certain administrative burden and receipted donations increase a registered charity’s spending obligation. Therefore, your charity may choose to issue receipts according to certain criteria or you may choose not to issue receipts at all. Either way, in the interests of good public relations, your policy should be communicated to your donors.

Examples

Some registered charities set minimum donation thresholds for receipting (for example, receipts are given for donations of $20 and over). Others do not provide receipts during certain fundraising events (for example, a garage sale or penny carnival).

R8. For any given calendar year, when must our charity complete all receipting?

R8. Pour une année d’imposition donnée, à quel moment notre organisme de bienfaisance doit-il effectuer la délivrance de tous ses reçus?


Réponse courte

L’Agence du revenu du Canada suggère que les organismes de bienfaisance délivrent les reçus aux donateurs au plus tard le 28 février de l’année suivant la date du don, ce qui permet aux donateurs de demander la déduction dans leur déclaration de revenus.

R9. Our charity received a gift from another registered charity. Should we issue an official donation receipt to the other charity?

R9. Our charity received a gift from another registered charity. Should we issue an official donation receipt to the other charity?


Short answer

No, you should not issue official donation receipts to other charities. Charities do not pay taxes, therefore do not need an official donation receipt. You do need to give your charity registration number to the other charity for its reporting requirements.

Long answer

In cases where a donation is received from a charity, a normal business receipt is sufficient to acknowledge the gift.

Business receipts are also used in the case of acknowledging other transactions that are not eligible for an official donation receipt, such as sponsorship where there has been a clear advantage to the business.

Registered charities must keep track of gifts received from other registered charities as these amounts are required to calculate the disbursement quota.

For more information see: www.cra-arc.gc.ca/chrts-gvng/chrts/prtng/gfts/rgstrd-chrts-eng.html

R10. My charity is hiring a third party to organize a fundraiser. Can that third party issue the official donation receipts?

R10. My charity is hiring a third party to organize a fundraiser. Can that third party issue the official donation receipts?


Short answer

No.

Long answer

Although a registered charity can enroll a third party organization or retain a fundraiser to organize a fundraising event, the position of the Canada Revenue Agency (CRA) is that the charity should maintain control over all monies that are earned as part of the event and over the receipts that are issued.

In addition, if the charity does not run the event by itself, through its own employees or volunteers, it should put in place a written agreement setting out the fundraising arrangements and ensuring that all fundraising and receipting rules are adhered to.

Lastly, charities should be aware before entering such arrangements of CRA’s policy on fundraising. Read up on it at Fundraising by Registered Charities

More

For more on third-party fundraisers, see Third-party fundraisers for the benefit of a particular registered charity - Policy Commentary .

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Format & Required Information

R11. What information should we include on an official donation receipt?

R11. What information should we include on an official donation receipt?


Short answer

An official donation receipt must include, in a manner that cannot be readily altered, at least the following information:

  • a statement saying that it is an official receipt for income tax purposes;
  • the charity’s BN (Business Registration Number), name, and address in Canada as recorded with the Canada Revenue Agency;
  • the serial number of the receipt;
  • the place or locality where the receipt was issued;
  • if it is a cash donation, the day and year on which the charity received the donation;
  • if the donation is a gift other than cash, that is, a gift in kind,;
    • the day on which the charity received the donation;
    • a brief description of the gift;
      and
    • the name and address of the appraiser of the property, if an appraisal was &nbsp completed;
  • the day on which the charity issued the receipt, if that day differs from the date on which the charity received the donation;
  • the full name (including middle initial) and address of the donor;
  • the amount of a cash donation, or if the donation is a gift other than cash, the amount that is the fair market value of the gift at the time it was made or deemed fair market value, if that rule applies;
  • value and description of any advantage received by the donor;
  • eligible amount of gift;
  • signature of an individual authorized by the charity to acknowledge donations;
  • name and website address of the Canada Revenue Agency www.cra.gc.ca/charities.
Long answer

In preparing official donation receipts, a registered charity must indicate the year in which it actually received the gift. If a gift is dated, mailed, and postmarked in one year and received in the next year, the charity can issue a receipt indicating the year appearing on the postmark as the date it received the gift. A charity may not, however, issue a receipt until it has actually received the gift.

A charity must keep on file a copy of all official receipts that it issues. In general, a charity must keep copies of receipts for two calendar years after the end of the calendar year to which the receipt applies.

Exceptions

If the charity operates in Quebec or has accepted a gift from a donor resident in Quebec, it can issue two official donation receipts for a single gift provided they contain identical information. That is, both receipts must have the same serial number; the additional receipt is required for Quebec income tax returns. When it is not possible for a registered charity outside of Quebec to issue a second receipt that bears the same serial number, the charity can advise donors that it is acceptable to submit a photocopy of the original receipt when filing their Quebec income tax return.

More…

See FAQ R12 – Sample Receipts.

R12. What does an official receipt look like?


R12. What does an official donation receipt look like?


Sample Donation Receipts - Word Document

Sample #1 - Cash gift (no advantage)

Official Donation Receipt For Income Tax Purposes

Receipt # 0001


Charity Name Canadian Address Charity BN/Registration #

 


Date donation received: _______________

Donated by: _____________________________
(First name, initial, last name)
Address: _____________________________



Eligible amount of gift for tax purposes: ______________________________


Date receipt issued:_____________________________

Location issued: _______________________________

Authorized signature: ____________________________


For information on all registered charities in Canada under the Income Tax Act
please visit:
Canada Revenue Agency www.cra.gc.ca/charities




Sample #2 - Cash Gift (with advantage)

Official Donation Receipt For Income Tax Purposes

Receipt # 0001


Charity Name Canadian Address Charity BN/Registration #

 


Date donation received: _______________

Donated by: _____________________________
(First name, initial, last name)
Address: _____________________________



Total amount of cash received by charity =

________________ A
Value of advantage =
(cash / fair market value of property or services)
________________ B
Eligible amount of gift for tax purposes =
(line A minus line B)
________________ C

 

Date receipt issued:_____________________________

Location issued: _______________________________

Authorized signature: ____________________________



For information on all registered charities in Canada under the Income Tax Act
please visit:
Canada Revenue Agency www.cra.gc.ca/charities





Sample #3 - Non-Cash Gift (no advantage)

Official Donation Receipt For Income Tax Purposes

Receipt # 0001


Charity Name Canadian Address Charity BN/Registration #

 

Date donation received: _______________

Donated by: _____________________________
(First name, initial, last name)
Address: _____________________________



Eligible amount of gift for tax purposes: ______________________________
(fair market value of property)

 

Description of property received by charity: ______________________________

Appraised by: ______________________________

Address of appraiser: ______________________________



Date receipt issued:_____________________________

Location issued: _______________________________

Authorized signature: ____________________________


For information on all registered charities in Canada under the Income Tax Act
please visit:
Canada Revenue Agency www.cra.gc.ca/charities





Sample #4 - Non-Cash Gift (with advantage)

Official Donation Receipt For Income Tax Purposes

Receipt # 0001


Charity Name Canadian Address Charity BN/Registration #

 


Date donation received: _______________

Donated by: _____________________________
(First name, initial, last name)
Address: _____________________________



Total amount of non-cash received by charity=

________________ A
Value of advantage =
(cash / fair market value of property or services)
________________ B
Eligible amount of gift for tax purposes =
(line A minus line B)
________________ C

 

Description of property received by charity: ______________________________

Appraised by: ______________________________

Address of appraiser: ______________________________



Date receipt issued:_____________________________

Location issued: _______________________________

Authorized signature: ____________________________


For information on all registered charities in Canada under the Income Tax Act
please visit:
Canada Revenue Agency www.cra.gc.ca/charities


R13. Can receipts have a facsimile signature?

R13. Can receipts have a facsimile signature?


Short answer

Yes, under certain circumstances.

Receipts can have a facsimile signature if they are:

  • imprinted distinctly—usually by a commercial printer—with the name, address, and BN/registration number of the charity;

    and

  • serially numbered by a printing press or numbering machine;

All unused receipt forms must be kept at the charity’s Canadian address, as recorded with the Canada Revenue Agency.

R14. Can our charity issue computer-generated receipts?

R14. Can our charity issue computer-generated receipts?


Short answer

Yes, your charity can issue electronic official donation receipts as long as they contain all of the required elements (see FAQ R12), are readable, and the data is sufficiently protected from unauthorized access. If your charity fails to adequately safeguard and maintain records in a readable and reliable manner, you could be considered to have failed to meet the legal requirement to keep adequate books and records.

Long answer

To protect computer-generated receipts from unauthorized access, registered charities should ensure that:

  • the computer system used to store the receipts is password-protected and restricts entry to and modification of donor contribution records;
  • donor records are stored on non-erasable media, such as CD-ROMs or printouts,
    and
  • hard copies of issued receipts can be printed on request;

A computer-stored copy of an official donation receipt, known as a “soft copy,” will be considered a duplicate for purposes of the Income Tax Act if the following conditions are met:

  • it contains all the necessary information required on the contents of receipts as described above;
    and
  • a charity can, at any time, print a copy of the receipt without inputting any new data required on receipts;

To be considered a duplicate, the computer-stored copy does not have to carry an electronic signature.

R15. Can our charity send official donation receipts by e-mail?

R15. Can our charity send official donation receipts by e-mail?


Short answer

Yes. Your charity, however, should take the following precautions to protect your electronic receipts:

  • receipts should be in a read only or non-editable format;
  • receipts should be protected from hackers through the use of appropriate software;
  • the document should be encrypted and signed with an electronic signature;
  • the use of a secure electronic signature should be kept under the control of a responsible individual authorized by the charity;
    and
  • copies of e-mail issued receipts must be retained by the charity;

Improper Receipting

R16. What if our stock of official donation receipts has a mistake? Can we use corrected printed receipts, and, if so, how do we make the correction?

R16. What if our stock of official donation receipts has a mistake? Can we use corrected printed receipts, and, if so, how do we make the correction?


Short answer

Your charity can use a stamp that clearly shows a change of name, address, or BN/Registration number if it wants to use its remaining stock of official donation receipts before ordering a new supply.

Also, your charity must make sure that the incorrect information is crossed out, either by the stamp or by hand.

R17. How can our charity replace a lost or spoiled receipt?

R17. How can our charity replace a lost or spoiled receipt?


Short answer

To replace a lost receipt, your charity can issue a replacement that must contain all required information plus the serial number of the lost receipt. The replacement receipt should also state that it “cancels and replaces the lost receipt.” Your copy of the lost receipt must be retained and marked “cancelled.”

In the case of a spoiled receipt, your charity can issue a new receipt, but must keep both the donor’s and charity’s original copies, marked “cancelled.”

R18. What steps should a registered charity take when it issues a receipt with an incorrect amount?

R18. What steps should a registered charity take when it issues a receipt with an incorrect amount?

CRA has indicated that the following four (4) point course of action is acceptable:

  • A replacement tax donation receipt with covering letter explaining the change and reason for the error (eg. error in determining FMV) should be issued to the donor in the correct amount.

  • A copy of the previously issued receipt for XXX, marked “cancelled” should be provided to the donor with instructions that the donor would need to re-file for the XXXX taxation year, if the receipt in question were then claimed by the donor.

  • A copy of the letter to the donor, together with the cancelled original charitable receipt and revised charitable receipt should be copied to the Charities Directorate, along with the full particulars or the name and address of the donor.

  • A copy of the cancelled receipt and the newly issued receipt should be kept in the records of the charity and the charity should file a revised annual information return, form T3010, for the year XXXX, to reflect the changes in the receipts issued.

Source: Policies and Technical Information – Information Letter CIL 2001-023

R19. What is the penalty for issuing receipts with false information?

R19. What is the penalty for issuing receipts with false information?


Short answer

A registered charity that issues an official donation receipt with incorrect or incomplete information can be subject to a penalty of five per cent of the eligible amount stated on the receipt. This penalty increases to 10 per cent if the violation is repeated within five years. A registered charity that issues an official donation receipt that includes deliberately false information is liable to a penalty equal to 125 per cent of the eligible amount stated on the receipt.

Long answer

If a charity is subject to more than $25,000 in penalties for having issued false receipts, that charity may have its charitable status suspended for one year.

A registered charity that disregards or continues to disregard the receipting requirements of the Income Tax Act could also have its registration revoked.

R20. Is there anything else that our charity should know about false receipting?

R20. Is there anything else that our charity should know about false receipting?


Long answer

The Canada Revenue Agency (CRA) has a growing concern regarding false receipts discovered when auditing individual’s income tax returns. Some of the false receipts have been produced by the charities themselves; some have been created by others without the charity even being aware of the scheme.

Charities should take the utmost care to protect and ensure the integrity of their official income tax receipts. Not only is it important to keep proper books and records of all donations so that accurate receipts can be issued, but also so that amounts can be verified if reviewed or audited by the CRA.

It is equally important to maintain adequate internal controls to restrict access to the receipts and related software programs:

  • All blank receipts should be kept in a fireproof safe;
    or
  • at a minimum, under lock and key in a secure storage room.
  • Computer programs should be password protected with access restricted to those who are responsible for issuing the receipts.

Your charity may receive a request from the CRA asking for the donor’s name and the amount on a particular receipt by number. This is one way they determine if a taxpayer’s receipt is valid.

Determining Eligible Amounts

Receipting - Determining Eligible Amounts

This section of Frequently Asked Questions covers Determining the Eligible Amount on Official Donation Receipts including questions about the principles of fair market value, advantage, de minimis and split receipting; then, how those rules apply to such special gifts as services, certified cultural property, ecologically sensitive land, and other types of investments. There are twenty-eight questions divided into two sections:
  1. General Rules

  2. Special Gifts

Remember: You can move around the FAQs by choosing from the six (6) main question areas listed in the left hand menu under FAQs or you can use the Search box found in the top right corner of every page.

General Rules

D1. What is fair market value and why is it important?

D1. What is fair market value and why is it important?

Fair market value (FMV), which is not defined in the Income Tax Act , is understood as:

  • the highest dollar value you can get for your property;
  • in an open and unrestricted market;
  • on the day that it was transferred;
  • between a willing and knowledgeable buyer;
  • and a willing and knowledgeable seller;
  • who are acting independently of each other.

This concept is important for several reasons.

  • To issue an official donation receipt, a charity must know the fair market value of what it has received. If the fair market value cannot be reasonable determined, then an official donation receipt cannot be issued.
  • A charity must also determine the fair market value of any advantage that it provides to the donor.
  • The fair market value is required to calculate the eligible amount of the gift; as well, calculations are required to determine the amount of the advantage in relation to the intention to make a gift and the de minimis thresholds.
  • If the charity’s receipts are not based on the concept of fair market value, it risks its registration as a charity. Charities bear the onus of ensuring that the fair market value reflected on official donation receipts is accurate.

D2. What is the “deemed fair market value” rule? Why is it important?

D2. What is the “deemed fair market value” rule? Why is it important?


Short answer

The deemed fair market value rule states that, under certain conditions, a receipt issued for a non-cash gift—known as a “gift in kind”—must be issued for the lesser of:

the gift’s fair market value
or
the cost to the donor or, in the case of capital property, its adjusted cost base, immediately before the gift was made.

 

Long answer

The conditions of the deemed fair market value rule are that

1. the gift was donated after December 5, 2003
 

and

2. the gift was acquired by the donor as part of a tax shelter arrangement
 

or

  the gift was acquired less than three years before the time of the donation
 
or
  the gift was acquired less than ten years before the time of the donation and one of the main purposes of the acquisition was to gift the property to a registered charity or other qualified donee.

Exceptions
There are also exemptions from the deemed fair market value rule. That is, the following gifts will be valued at their fair market value:
  • gifts made as a consequence of a taxpayer’s death;
  • gifts of inventory;
  • gifts of real property situated in Canada;
  • gifts of certified cultural property , which has its own set of rules;
  • gifts of certain publicly traded securities; and
  • some ecological gifts , which have their own set of rules, unless the charity is a private foundation.


Example
  • A donor purchases a work of art in 2004 for $300.
  • Six months later, the donor donates the work of art to a registered charity.
  • Prior to the donation, the donor had the work appraised at $1000.
  • Because the donor is giving the art within three years of having bought it, the charity must issue a receipt for the lesser of its fair market value ($1,000) or the cost to the donor ($300).
  • Therefore, the donation receipt must be made out for $300.

 

More…

For more information on the deemed fair market value rule, see the following Canada Revenue Agency Publications:

D3. A donor told our charity that we should apply the “deemed fair market value rule” to his gift in kind. Whose responsibility is it to ensure that the rule is applied?

D3. A donor told our charity that we should apply the “deemed fair market value rule” to his gift in kind. Whose responsibility is it to ensure that the rule is applied?


Short answer

A donor must inform the charity that the deemed fair market value rule applies.

Long answer

If a donor gives a gift in kind to a charity for which a receipt is issued and the donor fails to notify the charity that the deemed fair market value rule applies, the value of the donor’s gift could be reduced to zero.

More…

Deemed Fair Market Value Rule

D4. Our charity received a gift of a musical instrument. How does our charity determine the fair market value of gifts in kind?

D4. Our charity received a gift of a musical instrument. How does our charity determine the fair market value of gifts in kind?


Short answer

To determine the fair market value of gifts in kind, your charity requires knowledge of the property being appraised or valued and a specialized knowledge of the principles, theories, and procedures with respect to that property. If no one in your organization has these skills and knowledge, you should find someone who does.

Long Answer

A valuator should research the property and obtain market data in the appropriate market place. In the case of personal property, various market levels need to be analyzed to determine the most relevant market for the subject property. The effective date of the valuation is another key factor since economies, markets, and market levels change frequently and rapidly.

If valued at less than $1000
Generally, if the fair market value of the property is less than $1,000, a member of the registered charity or another individual with sufficient knowledge of the property may determine its value. That person should be competent and qualified to evaluate the particular property.

If valued at more than $1000
If the value of the donated property is anticipated to have a fair market value greater than $1,000, an independent appraiser or valuator—someone who is not associated with either the donor or the charity—should determine the fair market value of the items. The Charities Directorate strongly recommends that the property be appraised by a third party. The services of a competent, qualified individual in the appropriate specialty area are important to obtaining a supportable, well-reasoned opinion of value. When the property is appraised, the name and address of the appraiser must be included on the official donation receipt.

The CRA also uses the services of professional appraisers and valuators to ensure the fair market value of the property is appropriately stated.

In some circumstances, the cost of the appraisal may represent a significant cost to the charity relative to the worth of the gift. This is not a basis for foregoing the appraisal. when this is the case, however, the charity may wish to seek an additional cash gift from the donor to defray the cost of the appraisal.

Note
Under certain conditions, the deemed fair market value rule may also apply.

More…

See Who should appraise a gift? for further information.

D5. Our charity received a gift in kind worth more than $1,000. Do higher-priced items have to be appraised by more than one appraiser?

D5. Our charity received a gift in kind worth more than $1,000. Do higher-priced items have to be appraised by more than one appraiser?


Short answer

No. Your charity, however, must be satisfied that the appraised amount accurately reflects the fair market value of the item.

D6. What if the fair market value cannot be determined?

D6. What if the fair market value cannot be determined?


Short answer

If the fair market value of an item cannot be reasonably determined, an official donation receipt cannot be issued.

D7. When determining the fair market value of an item should we include the GST/ HST?

D7. When determining the fair market value of an item should a registered charity include the GST/HST?

No.

The fair market value of an item should not include taxes paid on purchasing the item. Taxes are a cost incurred by the purchaser and are payable to the Crown. The seller merely acts as an agent of the Crown in collecting the taxes

For example, a donor purchases a book from a dealer, pays the dealer the GST/HST on the transaction, then gifts the item to a registered charity. The amount entered on the official donation receipt should be the fair market value of the book before taxes.

D8. What is split receipting

D8. What is split receipting?


Short answer

The term “split receipting” refers to the fact that, from the charity’s perspective, the donation is split into two portions:

  • the portion for which the charity can issue a receipt (that is, the eligible amount)
    and
  • the portion for which the charity cannot issue a receipt (that is, the advantage).
Long answer

Split receipting is a legislative concept in which a donor can receive something in return for a gift and still be eligible for a tax receipt. In such a case, the donor is said to receive an advantage and split receipting is required. The gift must, however, still be a voluntary transfer of property and must meet the intention to make a gift threshold, which means that there is a limit on how much advantage a donor can receive and still get a tax receipt.

Note that, to be taken into account for split receipting purposes, an advantage must meet the intention to make a gift threshold and exceed the de minimis amount for purposes of the donation). If the intention to make a gift threshold is surpassed, that is, the value of the advantage exceeds 80 per cent of the gift, no receipt may be issued for the transaction. If the de minimis amount is not met (the lesser of 10 per cent of the gift or $75), the advantage is not taken into consideration in determining the amount of the receipt.

More...

For more information on split receipting, see

D9. What is an "advantage" and why is it important?

D9. What is an "advantage" and why is it important?


Short answer

An advantage is the total value of any property, service, compensation, use, or any other benefit that a donor receives in return for his or her donation. This value must be taken into consideration when determining the eligible amount of a gift for receipting purposes. In other words, your charity must know this amount in order to issue an official donation receipt for the correct amount.


Example
You donate money to your town’s opera company, which is a registered charity. In gratitude, the company provides you with three tickets to a performance that are valued in total at $150. You are therefore considered to have received an advantage of $150.

 

Long answer

The concept of advantage is very broad. It includes the value of property, the use or enjoyment of property, services, user licences, or other benefits granted to the donor or to a person who is related to the donor.

For receipting purposes, the manner in which the advantage is handled depends on the amount in question.

  • If the value of the advantage is 80 per cent or less of the fair market value of the donation, then a receipt may be issued for the difference (see split receipting).
  • If the value of the advantage is greater than 80 per cent of the value of the donation, no gift is deemed to have been made and an official donation receipt cannot be issued.
  • If the value of an advantage is the lesser of $75 or 10 per cent of the value of the donation, it is considered nominal (called de minimis) and it need not be deducted from the donation amount of the gift for receipting purposes.
  • If the fair market value of the advantage cannot be determined, a receipt cannot be issued.

D10. How does our charity determine the fair market value of an advantage?

D10. How does our charity determine the fair market value of an advantage?


Short answer

Determining the fair market value of an advantage is similar to determining the fair market value of a gift in kind. While only donations of property can be receipted as gifts in kind, the fair market value of any type of advantage (for example, services, accommodation, or meals) must be taken into consideration when determining the eligible amount of a gift for receipting purposes.

The determination of the fair market value of the advantage must be done regardless of the item’s actual cost to the registered charity. That is, even if the charity did not pay for the item it offers as an advantage, its fair market value must be calculated.

Example
One hundred (100) books are donated to the charity by a retailer. These books are worth $25 each on the open market. So the fair market value of the advantage is $25. If the Charity decides to give these books to their donors, this advantage of $25 has to be taken into consideration in determining the eligible amount on the official donation receipt.

 

Note

If the fair market value of the advantage cannot be determined, receipts cannot be issued.


D11. Our charity plans to offer door prizes and baseball caps at our next fundraising event. Do all these benefits have to be treated as an advantage?

D11. Our charity plans to offer door prizes and baseball caps at our next fundraising event. Do all these benefits have to be treated as an advantage?


Short answer

Yes.

Long answer

The value of any complementary benefits provided to participants for attending the event (for example, caps and pens) and the value of door prizes that all attendees are eligible for will be viewed as an advantage unless the aggregate value of such items, per ticket sold, does not exceed the de minimis threshold—that is, the lesser of 10 per cent of the ticket price or $75.

Therefore, for the purpose of establishing the eligible amount, that is the amount of the official donation receipt, your charity needs to combine and average out across all participants the value of all the benefits.

D12. What is the “de minimis” threshold and why is it important?

D12. What is the “de minimis” threshold and why is it important?


Short answer

The de minimis threshold rule allows a donor to receive an official donation receipt for the full amount, when the advantage that the donor receives does not exceed the lesser of $75 or 10 per cent of the amount of the gift to the registered charity.

Example

A museum gives small gifts to acknowledge donations of certain amounts:
  • For a $150 donation, donors receive a calendar worth $14
  • For a $200 donation, donors receive a tote bag worth $25
  • For a $1,000 donation, donors receive a gift certificate worth $100

Can the museum issue donation receipts for these gifts?


The $14 calendar is worth less than the lesser of $75 or $15 (10 per cent of the $150 donation) and is therefore not considered an advantage.
An official receipt can be issued for $150.

The $25 tote bag is worth more than the lesser of $75 or $20 (10 per cent of the $200 donation) and must be considered an advantage.
An official receipt can be issued for $175.

The $100 gift certificate is greater than the lesser of $75 or $100 (10 per cent of the $1,000 donation) and must be considered an advantage.
An official receipt can be issued for $900.

 

D13. Does our charity have to consider every advantage in the calculation of the de minimis amount?

D13. Does our charity have to consider every advantage in the calculation of the de minimis amount?


Short answer

No. Not all the advantages are included in calculating the de minimis amount. But all the advantages are included in determining the eligible amount on the official donation receipt.

Long answer

For purposes of calculating the de minimis threshold, CRA distinguishes between conferring advantages that are integral to a fundraising event and those that are secondary. It does so by not including an advantage that is the “object of the event” in the de minimis calculation.. However, this “object of the event” advantage is still included when determining the eligible amount of the donation,

So a charity must first consider what the object of the event is, and what the value associated with the object of the event is. The value of that activity is not to be included in the calculation of the de minimis threshold. However, the value of that activity is taken into account when calculating the eligible amount and determining how much the receipt is issued for.

As well, any elements of an event offered as benefits or consideration in addition to the activity that is the object of the event, for example, T-shirts given to participants in a fundraiser, are taken into account for purposes of calculation of the de minimis threshold.

Example

At a fundraising dinner, while the gourmet dinner is a value received, the object of the event is a meal. If donors pay $100 per ticket for a fundraising dinner and the meal is valued at $45 per person, the official donation receipt should read $55. If there is also a draw for a $50 door prize, it is counted in determining whether the de minimis threshold is surpassed. That is, are the benefits or consideration beyond providing the meal more than $75 or 10 per cent of the ticket price?

Other examples of objects of an event

  • the value of a comparable ticket for a concert;
  • the value of green fees, cart rental, and meal at a golf tournament.
More…

See FAQ D14 and CRA’s Technical News No. 26

D14. How does our charity determine the eligible amount of the gift?

D14. How does our charity determine the eligible amount of the gift?


Short answer

Your charity can issue an official donation receipt for only the “eligible” amount of the gift. This is the fair market value of the gift minus the fair market value of the advantage.

Example

A donor donates $5,000 to a registered charity.

As a thank you, the registered charity gives the donor a $250 hotel stay.

The eligible amount of the gift is calculated as follows:

  • The fair market value of the property transferred to the charity
$5,000.00
  • Less the fair market value of the advantage to the donor
$250.00
========

Equals the eligible amount of the gift

$4,750.00

Although the $250 is less than 10 per cent of $5,000, the de minimis threshold still applies, since the amount is more than $75.


Long answer
  • If there is no advantage to the donor or if the advantage is of a de minimis amount, the eligible amount will be the same as the donation amount (and it is not a split-receipting situation).

  • If there is an advantage to the donor, the amount of the gift is not the same as the amount that appears on the official donation receipt (and it is a split-receipting situation).
Note

When completing this calculation, a charity must keep in mind the concept of the “intention to make a gift” threshold. In order to meet this threshold, the amount of the advantage received by the donor cannot exceed 80 per cent of the fair market value of the total property transferred. And the advantage received by the donor must not exceed the de minimis amount.

D15. In split receipting, what is the "intention to make a gift" threshold?

D15. In split receipting, what is the "intention to make a gift" threshold?

When a donor has received an advantage in return for his or her gift to a registered charity, in order for the donation to qualify for an official donation tax receipt, the gift must meet what is called the “intention to make a gift” threshold.

In order to meet this threshold, the amount of the advantage received by the donor cannot exceed 80 per cent of the fair market value of the total property transferred.

Example

A donor gives a charity $200 and receives in return dinner theatre tickets worth $175.
  • The intention to make a gift threshold is $160 (80 per cent of $200)
  • The tickets, which have a fair market value of $175, exceed the threshold ($160) by $15.
  • Therefore, the gift is not eligible for an official donation tax receipt.

Special Gifts

D16. What is the general principle on receipting of donations of services?

D16. What is the general principle on receipting of donations of services?


Short answer

Contributions of services (that is, time, skills, or effort) do not qualify as gifts. At law, in order for there to be a gift, there must be a transfer of property; services do not involve such a transfer.

Long answer

A charity can, however, pay for services rendered and later accept the return of all or a portion of the payment as a gift, provided it is returned voluntarily. This is often referred to as a cheque exchange. In such a case, a charity should make sure that it keeps a copy of the invoice issued by the service provider. The invoice and cheque exchange not only ensure that the charity is receipting a gift of property, but they also create an audit trail, as the donor must account for the taxable income either as remuneration or as business income.

A charity should not issue an official donation receipt to a service provider in exchange for an invoice marked “paid”. Eoing so would raise questions about whether any payment has been transferred from the charity to the service provider and, in turn, whether any payment has been transferred back to the charity.

(Although, in some circumstances, CRA does permit a charity to issue a donation receipt to volunteers, in lieu of re-imbursing expenses incurred by the volunteer, this practice does not extend to service providers. For more information on when volunteers can receive a donation receipt, see question S30. Re-imbursed expenses are not income for a volunteer, and do not have to be reported as remuneration or business income.)

 

Example  
  ABC Landscaping ploughs the snow and sands the parking lot of a charity.
 
  • Between January and March, ABC cleans the charity's parking lot ten times.
  • Each cleaning is worth $200.
  • At the end of March, the owner of ABC says, “Just give me a donation receipt for $2,000.”
  Can the charity issue a donation receipt to ABC?
  No. The charity cannot issue a receipt. Gifts must involve a transfer of property; providing a service does not involve a transfer of property.
 

However, ABC could bill the charity for the $2,000. The society would pay the invoice.

If ABC subsequently gives the charity $2,000, or another amount, ABC can receive a donation receipt for that amount.

 

Longer answer

Sometimes the line between what constitutes a property and what constitutes a service is quite clear. If an individual or company cleans the charity’s office, the individual or company is providing a service rather than a property and this cannot be receipted as a gift in kind.

Other scenarios are less clear, either because it is not certain whether the scenario involves a service or property or whether the donor can be considered to have transferred property to a charity. For example, can a website be considered property for the purposes of making a gift? The Income Tax Rulings Directorate considers such proposed transactions on a case-by-case basis.

D20. What are the benefits of having property certified as cultural property?

D20. What are the benefits of having property certified as cultural property?


Short answer

The Income Tax Act provides favourable income tax treatment for the disposition of certified cultural property to institutions and public authorities designated by the Minister of Canadian Heritage.

Long answer

This treatment includes:

  • a tax exemption for capital gains realized on the disposition of cultural properties to those designated institutions;
    and
  • when disposition is as a gift to those institutions, a tax credit or a deduction to donors of up to 100 per cent of their net income.
More…

For further information, see
Guide T4037 Capital Gains .

D17. What are the general principles on receipting of capital property as gifts?

D17. What are the general principles on receipting of capital property as gifts?


Short answer

Capital property is depreciable property that, if sold, would result in a capital gain or a capital loss to the owner. Capital property does not include the trading assets of a business, such as inventory. The deemed fair market value of a gift of capital property made by a taxpayer is used by the charity to determine the eligible amount of the gift for receipting purposes.

Long answer

The following properties are generally capital properties:

  - cottages;
- securities, such as stocks, bonds;
 

and

  - units of a mutual fund trust and land, buildings, and equipment used in a business or a rental operation

Generally, a taxpayer or corporation that gives capital property as a gift is deemed to have received proceeds of disposition equal to the fair market value of the property, subject to the deemed fair market value rule. If the fair market value of the property exceeds its adjusted cost base, the taxpayer or corporation will realize a capital gain as a result of such a disposition. A taxpayer or corporation can reduce the capital gain, however, when the gift or bequest of a capital property is made to a registered charity.

In addition, if a donor makes a gift of capital property to a registered charity and the fair market value (or deemed fair market value, if applicable) of the donated capital property is determined to be more than its adjusted cost base, the donor may designate an amount that is less than the fair market value to be the proceeds of disposition. This may allow a donor to reduce the capital gain otherwise calculated.

Any such amount that a donor chooses to designate in respect of the donation must be within the following limits:

(a) it cannot be more than the fair market value of the property at the time the gift is made
 

and

(b) it cannot be less than the adjusted cost base of the property.

The designated amount is deemed to be the proceeds of disposition of the property. It is also considered to be the fair market value (or deemed fair market value, if applicable) of the gift made by the taxpayer for the purposes of determining the amount of the deduction or tax credit. Furthermore, this amount is used by the charity to determine the eligible amount of the gift for receipting purposes.

Keep in mind that a charity always issues the receipt for fair market value or deemed fair market value. The donor may choose to use the adjusted tax base.

Note

Because of the complexity of capital property as gifts, a charity will benefit from seeking professional help in sorting out all related issues.

 

D18. What are the general principles on receipting gifts of certified cultural property?

D18. What are the general principles on receipting gifts of certified cultural property?


Short answer

Certified cultural property is property that has been determined by the Canadian Cultural Property Export Review Board to be of “outstanding significance and national importance” to Canada. The Review Board issues tax certificates for the fair market value of such items. Certified cultural property can include, among other examples:

  • art
  • archival material
  • decorative arts
  • musical instruments
  • military objects
  • technological objects

Long answer

Special incentives have been created to encourage Canadians to keep in Canada cultural property that is of outstanding significance and national importance. Under the Cultural Property Export and Import Act, people can donate this type of property to Canadian institutions and public authorities that have been designated by the Minister of Canadian Heritage. You can find a list of institutions and authorities designated by the Minister of Canadian Heritage here

The eligible amount of the gift is calculated based on the fair market value of the property, as of the date the donor legally transferred ownership.

The fair market value of the donated property, as determined by the Canadian Cultural Property Export Review Board, applies for a 24-month period. When that 24-month period lapses, the fair market value is re-determined and the new value holds for the following 24 months. When a donor makes a gift of the property, it is the last determined or re-determined fair market value that is used to calculate the eligible amount of the gift.

 

Note

As this is another complex area, charities receiving gifts of certified cultural property will benefit from professional help in sorting out related issues.

D19. Does cultural property have to be certified by the Canadian Cultural Property Export Review Board to be considered a gift-in-kind?

D19. Does cultural property have to be certified by the Canadian Cultural Property Export Review Board to be considered a gift in kind?


Short answer

No, not all cultural property has to be certified by the Review Board. Cultural property not certified by the Review Board is considered a regular gift in kind. So, the charity receiving the non-certified property may still issue an official donation receipt based on the fair market value as determined for any gift in kind (see FAQ D4). The donor would NOT receive the tax advantages described in FAQ D18 for certified cultural property.

Exception

Cultural property donated to registered charities or other qualified donees within Canada that are not designated Canadian institutions or public authorities is not subject to valuation through the Review Board process.

D21. If a charity that is a designated institution disposes of cultural property other than to another designated institution, what are the tax implications?

D21. If a charity that is a designated institution disposes of cultural property other than to another designated institution, what are the tax implications?


Short answer

Unless the property is transferred to another designated cultural institution
and
if the property were disposed of within 10 years of first being certified by the Canadian Cultural Property Export Review Board,
the organization would be subject to a special tax equal to 30 per cent of the fair market value of the property.

More…

More information on this topic is available in IT-407 Dispositions of Cultural Property to Designated Canadian Institutions.

D22. Our charity received a donation of ecologically sensitive land from a farmer. Can we issue an official donation receipt?

D22. Our charity received a donation of ecologically sensitive land from a farmer. Can we issue an official donation receipt?


Short answer

It depends. In order for an official donation receipt to be issued, the donation must:

  • fully qualify as a gift under Canadian tax law
    and
  • must meet the requirements for ecologically sensitive land.
Long answer

For it to be a gift, there must be a voluntary transfer of property. For example, a farmer donated a part of her land to your charity because as a condition for developing a portion of her property, she must donate part of her land for parkland. This donation would not qualify as a gift, as it was not voluntary.

All requirements for the gifting of ecologically sensitive land must also be met before a donation will be considered and treated as such. The requirements include:

  • the charity must be approved as an environmental charity and
  • each donation of land or a partial interest in land must be certified as ecologically sensitive before it can be included under the Ecological Gifts Program. The federal Minister of the Environment or a designated authority carries out this certification.
More…

A gift of ecologically sensitive land is dealt with in FAQ D20 and D21. Because of its complexity, a charity may wish to seek professional advice in dealing with this kind of donation.

 

D23. What are the general principles on receipting of gifts of ecologically sensitive land?

D23. What are the general principles on receipting of gifts of ecologically sensitive land?


Short answer

Gifts of ecologically sensitive land to a municipal or public body performing a function of government in Canada qualify for favourable tax treatment. Corporate donors may deduct the amount of their ecological gifts (eco-gifts) directly from their taxable income, while the value of an individual’s eco-gift is converted to a non-refundable tax credit. Donors of eco-gifts also receive a reduction in the taxable capital gain realized on the disposition of the property.

There are a number of steps involved in this process, including

  • arranging the donation
  • preparing and filing information on ecological sensitivity
    and
  • determining the fair market value of the donation.
Long answer

In order to receive a gift of ecologically sensitive land, a registered charity must:

  • have as one of its primary purposes “the conservation and protection of Canada’s environmental heritage” or some similar statement acceptable to the federal Minister of the Environment
    and
  • apply to Environment Canada for eligibility.

In addition, before it can be included under the Ecological Gifts Program, a donation of land or a partial interest in land must be certified as ecologically sensitive, that is, important to the preservation of Canada’s environmental heritage. The federal Minister of the Environment or a designated authority carries out this certification.

The Minister—through the offices of an appraiser—will also ultimately determine the fair market value of the gift. For a gift of a covenant or an easement or, in Quebec, a real servitude, the fair market value of the gift will be the greater of:

  • the determined fair market value of the gift
    or
  • the amount of the reduction of the land’s fair market value that resulted from the gift.

The fair market value of the donated property, as determined by the Minister, will apply for a 24-month period after the last determination. When 24 months have elapsed, a re-determination is required. The last determined or re-determined value is the value a charity must use to calculate the eligible amount of the gift, whether the gift is claimed as a gift of ecologically sensitive land or as an ordinary charitable gift.

Donors may gift fee simple donations (comprehensive rights to the real property) or partial interests (any one or combination of lesser rights short of a fee simple donation). Whether fee simple donations or a donation of a partial interest in land, all owners have a responsibility to maintain the biodiversity and environmental heritage of these properties in perpetuity.

More...

For more information, visit the Ecological Gifts Program or contact the program’s National Secretariat at 1-800-668-6767.

In addition, a very detailed and helpful handbook is available.

Note

This is a complex area, so charities receiving gifts of ecologically sensitive land will benefit from professional help in sorting out related issues.


D24. A donor wants to give our charity some ecologically sensitive land, but also wants to pass it on to her heirs. What does our charity do if the donor wants to maintain some connection with the land?

D24. A donor wants to give our charity some ecologically sensitive land, but also wants to pass it on to her heirs. What does our charity do if the donor wants to maintain some connection with the land?


Short answer

Although many eco-gifts are outright donations of land with no conditions (called “fee simple” donations), making such a gift does not necessarily mean severing the connection donors have with their land. There are options available.

Long answer

A conservation easement, covenant, or servitude is an agreement that is registered on title and that protects a property’s conservation value by permanently placing terms and conditions on its use that are determined by the donor. It can place limitations on subdividing, the number and location of structures, and the types of land use. Under the terms of the agreement, the donor continues to own the land and may live on it, sell it, or pass it on to heirs. The recipient ensures that the restrictions put on the property are followed in the future, regardless of who owns the land.

Whether your charity receives a fee simple donation or a donation that is a partial interest in land, in exercising your rights both you and the donor have a responsibility to maintain the biodiversity and environmental heritage of these properties in perpetuity.

D25. Our charity received a gift of mortgaged property. In what amount should we make out the official donation receipt?

D25. Our charity received a gift of mortgaged property. In what amount should we make out the official donation receipt?


Short answer

In order to determine the value of mortgaged property, your charity will have to consider all relevant factors, including market prices, the terms and conditions of the mortgage, and the amount and conditions of any other charges on the property.

In order to determine the eligible amount, it will be necessary to value the mortgage. Accurate valuation of a mortgage may involve examining the terms and conditions of the arrangement and not just calculating the outstanding principal. To do this, you may wish to hire an expert in the area.

Example

  • A house is transferred to a charity. The only advantage given by the charity is the assumption of the mortgage. The fair market value of the house is $575,000. The amount of the mortgage being assumed by the charity is $124,000.

  • If the terms and conditions of the mortgage were in line with the current market, the eligible amount would be $451,000 ($575,000 – $124,000 = $451,000).

  • The terms and conditions of the mortgage could be unfavourable, however. For example, high interest rates or high penalties for transfer might result in the charity having to pay a third party $150,000 to assume the mortgage. In such a case, the eligible amount would be $425,000 ($575,000 – $150,000 = $425,000).

Note: If any other advantage were being given to the charity, the amount of that advantage would also have to be considered when determining the eligible amount.

 

D26. What are the general principles on the receipting of charitable annuities?

D26. What are the general principles on the receipting of charitable annuities?


Short answer

A charitable gift annuity is an arrangement under which a donor contributes funds to a charitable organization in exchange for guaranteed payments for life at a specified rate depending on life expectancy or for a fixed term. When this occurs, the advantage received by the donor is a stream of guaranteed payments for a period of time.

The eligible amount for receipting

 
of the amount contributed by the donor
is equal to the excess
______________over__________________
 
the amount that would be paid at the time of donation to an arm’s length third party, like a trust company or bank, to acquire an annuity to fund the guaranteed payments.

 

Example

A donor makes a $100,000 contribution to a charitable organization.
  • The donor’s life expectancy is eight years.
  • The donor is to be provided annuity payments of $10,000 per year, which amounts to $80,000 over eight years.
  • The cost of an annuity that will provide $80,000 over eight years is $50,000.

Tax treatment

  • The donor receives an official tax receipt for $50,000 for the year of donation.
  • The donor receives $80,000 in annuity payments, of which $30,000 will be included in income over the eight years.

 

As indicated, the eligible amount for receipting is equal to the excess of  
$50,000

over the amount contributed by the donor over

$100,000

The amount that would be paid at the time of donation to an arm's length third party, like a trust company or bank, to acquire an annuity to fund the guaranteed payments equals

$50,000

 

Long answer

Charitable annuities issued after December 2002 are taxed under the Income Tax Act in the same manner as all other annuity contracts are taxed. Assuming the annuity is a “prescribed annuity contract” as defined in subsection 304(1) of the Income Tax Regulations, annuity payments are included in the taxpayer’s income in the year the payments are received and the taxpayer may claim a deduction in respect of the capital element of the payments.

While charities are advised to seek professional help in sorting out charitable annuities, specific reference should be made to section 300 of the Regulations. The calculation of the capital element of a life annuity apportions the “adjusted purchase price” of the donor’s interest in the annuity (that is, the cost of the annuity) over the expected life of the donor. The expected life of the donor is determined by referring to the 1971 Individual Annuity Mortality Table as prescribed in Volume XXIII of the Transactions of the Society of Actuaries.

D27. Our charity has been given a "charitable remainder trust". What is it and how is it receipted?

D27. Our charity has been given a "charitable remainder trust". What is it and how is it receipted?


Short answer

Generally, a charitable remainder trust involves transferring property to a trust whereby the donor or beneficiary retains a life or income interest in the trust but an irrevocable gift of the residual interest is made to a registered charity. A charitable remainder trust may be created either through provision in a will (a testamentary trust) or through a living (inter vivos) trust established and effective during the lifetime of the donor. Your charity can issue an official donation receipt for the fair market value of the residual interest at the time that the residual interest vests in your charity.

Long answer

The Canada Revenue Agency will consider a gift of residual interest to have been made if all of the following requirements are met:

  • property is transferred
  • the property must vest with the recipient charity at the time of transfer.

  • A gift is vested if:
    • the person or persons entitled to the gift are alive and their whereabouts is known,
    • the size of the beneficiaries’ interests are ascertained,
      and
    • any conditions attached to the gift are satisfied.

  • the transfer must be irrevocable
    and
  • it must be evident that the recipient organization will eventually receive full ownership and possession of the property transferred.

The method of valuing a residual interest in real property or an equitable interest in a trust, whether for determining the amount of a charitable donation or other tax consequences, will vary according to the type of gift, other interests in the property or trust, and the documentation providing the gift. 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 life tenants, and any other factors relevant to the specific case. In the case of property other than real property, the longer the period before full ownership of the property is passed to the charity, the more difficult it is to establish its value.

In cases where the size of a residual or equitable interest at the time of the donation cannot reasonably be determined, such as when a life tenant or trustee has a right to encroach on the capital of the trust, no deduction or tax credit in respect of the donation will be allowed.

Example 1
Assume that a trust is created by the will of a taxpayer to hold property gifted by the deceased to a registered charity.

The terms of the will require the trustees to pay all of the income earned by the trust to the taxpayer’s surviving spouse and, on the death of that spouse, to transfer the property to the charity.

Neither the spouse nor any other person has the power to encroach on the capital of the trust.

In this case, a testamentary gift of an equitable interest in a trust is considered to have been made and the taxpayer is deemed to have made a gift of the interest to the charity in the taxation year in which he or she died. Once it is established that a gift has been made, the value of the gift at the time of the transfer must be determined before it can be claimed for income tax purposes.

 

Example 2

Assume a taxpayer transfers a property to a trust and the trustee is instructed to pay all of the income earned by the trust to the taxpayer during the taxpayer's lifetime and, on the death of the taxpayer, to transfer the property to a registered charity.

If all of the requirements listed above were satisfied at the time of the transfer to the trust, an inter vivos gift of an equitable interest in a trust is considered to have been made at that time.

 

Note

Considering the complexity of a charitable remainder trust, your charity is well advised to consult professional help.

 

Issuing Receipts in Specific Situations

Receipting - Issuing Receipts in Specific Situations

This section of Frequently Asked Questions covers issuing proper tax donation receipts in a variety of specific situations, for example: membership fees, volunteer expenses, anonymous donations, raffle tickets and auction items. There are thirty-one questions divided into three sections:
  1. General Questions

  2. Who is the Donor?

  3. Fundraising Context
To read CRA's policy commentary on issuing a receipt in a name other than the donors see CPC-010

Remember: You can move around the FAQs by choosing from the six (6) main question areas listed in the left hand menu under FAQs or you can use the Search box found in the top right corner of every page.

General Questions about Specific Gifts

Issuing Receipts in Specific Situations - General Questions

S1.Our charity gives a very small token of appreciation to each donor. It is worth almost nothing. Must the amount as it appears on the official donation tax receipt be reduced by the cost of that token?

S2. A donor gave our charity a cash donation, but asked that the monies be forwarded to a specific family. Do we issue an official donation receipt?

S3. Are membership fees considered donations? Can donation tax receipts be issued?

S4. Can a company donate goods out of its inventory? If so, how much can the official donation receipt be issued for?

S5. Our charity wants to show its appreciation for a volunteer who spent many hours on a project. Can we issue a donation receipt for the volunteer’s services?

S6. Can an official donation receipt be issued to volunteers for expenses incurred on behalf of our charity if they bear the cost of those expenses?

S7. One of our donors would like to make a donation and receive advertising or sponsorship status in return. Can our charity do this and, if so, how should we make out the receipt?

S8. Can we take up a collection and raffle the receipt? A group of 20 people from work will each contribute $20 toward a $400 donation to charity. We would like to raffle a receipt for $400. Can we do this?

S9. Our charity received a donation of a $100 gift certificate from an aesthetician for a facial. How much should the receipt be for?

S10. Our charity received a donation of a $100 gift certificate from someone who purchased the gift certificate from an aesthetician. Can we issue an official donation receipt and for how much?

S11. Can official donation receipts be issued for publicly traded shares or stock options?

S12. Our charity received a donation of a life insurance policy. How should the receipt be issued?

S13. Our registered charity received a donation in the form of an RRSP death benefit. How should we issue the receipt?

S14. Our registered charity received a donation of an artist’s painting. How do we determine the amount for the official donation receipt?

S15. What are loanbacks and how do they work?

S16. Our charity was offered a one week stay at a holiday condo as an auction item. Can we issue a charitable receipt to the donor for the FMV of the gift?

S1. Our charity gives a very small token of appreciation to each donor. It is worth almost nothing. Must the amount as it appears on the official donation tax receipt be reduced by the cost of that token?

S1. Our charity gives a very small token of appreciation to each donor. It is worth almost nothing. Must the amount as it appears on the official donation tax receipt be reduced by the cost of that token?


Short answer

It depends on the value of the token. The token of appreciation is considered an “advantage”. How the value of the advantage influences the amount of the donation receipt is dependent on the amount of the de minimis threshold.

Long answer

Certain advantages are considered too small (known as “de minimis”) to affect the amount of the donation receipt. The de minimis threshold is the lesser of 10 per cent of the value of the property transferred or $75.

Example

A donor gives a charity $200

  • As a thank you, the charity gives the donor a tote bag worth $17
  • The de minimis threshold is the lesser of $20 (10 per cent of $200) or $75. Therefore, $20
  • The $17 tote bag is worth less than $20
  • Therefore, the receipt will show a donation in the amount $200

Example 2

A donor gives a charity $200

  • As a thank you, the charity gives the donor a sweatshirt worth $22
  • The de minimis threshold is $20 (10 per cent of $200) or $75. Therefore the threshold is $20
  • The $22 sweatshirt is worth more than $20
  • Therefore, the receipt will show a donation in the amount $178

Exception to the de minimis

De minimis does not apply to cash or near cash equivalents such as gift certificates, coupons, and vouchers.

Example 3

A donor gives a charity $200

  • As a thank you, the charity gives the donor a coupon worth $15
  • The de minimis threshold does not apply
  • Therefore, the receipt will show a donation in the amount $185

S2. A donor gave our charity a cash donation, but asked that the monies be forwarded to a specific family. Do we issue an official donation receipt?

S2. A donor gave our charity a cash donation, but asked that the monies be forwarded to a specific family. Do we issue an official donation receipt?


Short answer

No. Your charity may not issue a receipt if the donor has directed the charity to give funds to a specified person or family.

Long answer

A donation subject to a general direction from the donor that the gift be used in a particular program operated by the charity may be receipted as long as the donor or anyone close to the donor will not receive any benefits.

Example

An international development organization or faith-based group selects individuals who are eligible for an overseas posting based on the candidate for the placement raising a set amount of contributions to defray the cost of the trip and the posting. Under such arrangements, official donation receipts may not be issued for these contributions.

Exception

A donor may be able to receive a receipt for a gift directed toward a person, family, or other non-qualified donee if they have been identified beforehand by your charity as recipients of your charitable program. The charity, however, must be able to reallocate all donated funds to other charitable programs or activities when it deems appropriate.

S3. Are membership fees considered donations? Can donation tax receipts be issued?

S3. Are membership fees considered donations? Can donation tax receipts be issued?


Short answer

The payment of a membership fee may or may not result in an eligible amount: it depends on whether there is an advantage, what amount that advantage is, and whether the membership fee exceeds the amount of the advantage. Specifically, if the amount of the advantage is 80 per cent or less of the amount of the membership fee, an official donation tax receipt may be issued for the eligible amount.

Long answer

A membership fee is considered a gift as long as it gives only the right to vote at a meeting and to receive reports of the charity’s activities, unless such reports are also sold. If the reports are available for a fee to non-members, they are valued as an advantage (benefit) and may affect the amount of the official donation tax receipt.

Example

The purpose of the registered charity is to promote musical education in youth through the creation of a youth orchestra. For a membership fee of $200, a member will receive:

  • the right to notice of, and attendance at, all meetings of the charity;
  • recognition as a donor on all concert programs;
  • a subscription to the charity’s monthly e-mail updates otherwise available free of charge, which provides concert dates, reviews, performer profiles, and so on;
  • an “I Support the Youth Orchestra” bumper sticker normally sold for $5;
  • a discount on all performances throughout the year, valued at $50;
  • tickets for free refreshments at the concerts, valued at $25;
Determination of eligible amount    

membership fee

  $200

membership fee

  ($80)
bumper sticker
$5
 
performance discount
$50
 
refreshment tickets
$25
 

eligible amount

  $120

As the amount of the advantage ($80) is less than 80 per cent of the $200 membership fee (80 per cent is $160), it meets the intention to make a gift threshold. An official donation receipt may be issued for the eligible amount of $120.

S4. Can a company donate goods out of its inventory? If so, how much can the official donation receipt be issued for?

S4. Can a company donate goods out of its inventory? If so, how much can the official donation receipt be issued for?


Short answer

Yes, this is considered gifts in kind. A company can donate from its inventory and a receipt may be issued for gifts in kind of property included in the donor’s inventory.

Long answer

A gift of inventory is considered to be given at fair market value. So, the value on the official donation receipt should be identical to the fair market value. The receipt issued must state that the gift is a gift in kind and must provide a brief description. The business then has to include in its income the fair market value of the gift.

The income of the company who donated from its inventory is increased because it must include the value of the gift. This increase, however, is offset by the charitable deduction.

Where a transaction results in a material benefit to the business,

  • the rules related to split receipting may apply;
    or
  • the benefit may be such that no part of the transaction can be considered a gift.

In cases where there is consideration, a business may claim these costs as promotional expenses rather than seeking a charitable donation receipt.

More…

Most non-monetary donations, commonly called gifts in kind, are subject to special rules about how their fair market value is calculated.Gifting and receipting- Questions and Answers outlines the details on these special rules.

S5. Our charity wants to show its appreciation for a volunteer who spent many hours on a project. Can we issue a donation receipt for the volunteer's services?

S5. Our charity wants to show its appreciation for a volunteer who spent many hours on a project. Can we issue a donation receipt for the volunteer's services?


Short answer

No. Contributions of services (that is, time, skills, or effort) do not qualify as gifts. To qualify as gifts, there has to be voluntary transfer of property.

Long answer

To show its appreciation, your charity could pay the volunteer for services rendered and later accept the return of all or a portion of the payment as a gift, provided it is returned voluntarily. An official donation tax receipt can then be issued. In this case, the volunteer is responsible to claim the income.

 

S6. Can an official donation receipt be issued to volunteers for expenses incurred on behalf of our charity if they bear the cost of those expenses?

S6. Can an official donation receipt be issued to volunteers for expenses incurred on behalf of our charity if they bear the cost of those expenses?


Short answer

Yes, your charity can issue an official donation receipt as long as there is proper documentation to support the expenses and certain requirements are fulfilled.

 The requirements are that

  • the volunteer has incurred the expenditures on behalf of the charity
  • the volunteer has a right to be reimbursed for such expenditures by the charity under an agreement between the volunteer and the charity

If the requirements are met, there are two options:

  • the charity issues the volunteer a cheque for the amount of the expenses claimed by the volunteer and which are supported by receipts and the volunteer freely chooses to give some or all of the reimbursement back to the charity

    The CRA encourages the charity and the volunteer to exchange cheques: that is, the charity issues a cheque to the volunteer covering the expenses and the volunteer then writes a cheque to the charity for the same amount. Using this cheque exchange results in proper financial records for the charity and a document confirming the volunteer’s gift.

  • the charity may treat the reimbursement as a gift in kind and issue a receipt for income tax purposes. In this case, the charity should have written direction from the volunteer.

    For example, the volunteer might write and sign:

    “I [name written out in full] donate as a gift to [name of the charity in full] $[the amount owing] to which I am entitled as reimbursement for [purpose of the expenses] and would otherwise be given to me by cash or cheque.”

If the charity issues a donation receipt, it should report the amount of the eligible amount as an expense and the gift or donation as revenue on its Registered Charity Information Return (Form T3010).

More

A charity should have a policy in place on reimbursing volunteers. Such a policy should specify both the type of expenses 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. With such a policy in place, the charity can demonstrate that it is controlling the use of its resources for charitable purposes.

For details, read the CRA policy on out of pocket expenses and volunteer expenses.

S7. One of our donors would like to make a donation and receive advertising or sponsorship status in return. Can our charity do this and, if so, how should we make out the receipt?

S7. One of our donors would like to make a donation and receive advertising or sponsorship status in return. Can our charity do this and, if so, how should we make out the receipt?


Short answer

Generally no, but there’s more that you should know. Sponsorship is not considered a gift, since the sponsor receives an economic benefit. Note, however, that a corporation may choose to support the same event or the same organization through both a sponsorship and a charitable gift. Where it does so, the charitable receipt must acknowledge only the amount of the gift. Since businesses receive a deduction rather than a credit for charitable gifts, the tax treatment is the same whether the business gives the funding in exchange for advertising or purely as a donation.

Long answer

Distinguishing between gifts and sponsorships can be difficult. If a business receives a nominal level of recognition, and is essentially treated the same as other donors, a receipt may be issued for the full amount of the donation. Exceptional treatment, or heightened recognition above other donors, however, can constitute advertising, which is seen as an advantage.

A contribution can be considered to be both a sponsorship and a donation if

  • the fair market value of the advantage (often advertising) can be established and
  • the amount contributed exceeds the fair market value of that advantage.

In this circumstance, a charitable receipt may be given for that portion that exceeds the fair market value.

If the advantage outweighs the value of the gift, a receipt is not appropriate.

In most cases, it is a challenge to establish the fair market value of advertising or sponsorship. Putting a value on something as hard to define as advertising requires professional help. Some professionals have developed methods for valuing such things as a banner, a print ad, and a website ad. It’s best to use an expert in these matters given the consequences of an inaccurate valuation and the CRA’s concern with a valuator’s qualifications. The CRA recommends using an independent valuator when the estimated value of the transaction is greater than $1000.

More...

Even without a charitable receipt, a business contributor may still enjoy the advantageous tax treatment of advertising or sponsorship. Corporations can deduct advertising expenses against their income. If a business makes a payment to a charity partly for business reasons and partly for philanthropic reasons, it is entitled to deduct both parts of the contribution from its expenses – although one portion as advertising or promotional expenses and the other portion as charitable expenses. Make sure when approaching businesses that you discuss with them both a contribution in the form of a sponsorship and a contribution in the form of a gift.

For more information see also: The tax aspects of corporate sponsorships by Adam Aptowitzer

S8. Can we take up a collection and raffle the receipt? A group of 20 people from work will each contribute $20 toward a $400 donation to charity. We would like to raffle a receipt for $400. Can we do this?

S8. Can we take up a collection and raffle the receipt? A group of 20 people from work will each contribute $20 toward a $400 donation to charity. We would like to raffle a receipt for $400. Can we do this?


Short answer

No. A charitable donation receipt can only be issued to the actual donor.

Long answer

In this case, each of the 20 donors has contributed $20. To issue a receipt, the charity must be able to identify the actual donor or donors. If a lump sum is donated without detailed donor information, the charity may not be able to issue any receipt.

 

S9. Our charity received a donation of a $100 gift certificate from an aesthetician for a facial. How much should the receipt be for?

S9. Our charity received a donation of a $100 gift certificate from an aesthetician for a facial. How much should the receipt be for?


Short answer

Zero. Your charity cannot issue an official donation receipt because there is no transfer of property. The gift certificate is for services and services are not property.

See: CRA Policy on Donation of Gift Certificates or Gift Cards


S10. Our charity received a donation of a $100 gift certificate from someone who purchased the gift certificate from an aesthetician. Can we issue an official donation receipt and for how much?

S10. Our charity received a donation of a $100 gift certificate from someone who purchased the gift certificate from an aesthetician. Can we issue an official donation receipt and for how much?


Short answer

Yes, an official donation tax receipt can be issued for $100, the fair market value of the gift certificate.

Long answer

A gift certificate that was bought from the person who created the gift certificate is considered property. When the purchaser donated the certificate to your charity, there is a transfer of property. An official donation receipt can be issued.

See: CRA Policy on Donation of Gift Certificates or Gift Cards

S11. Can official donation receipts be issued for publicly traded shares or stock options?

S11. Can official donation receipts be issued for publicly traded shares or stock options?


Short answer

It depends who the donor is.

  • Yes, if a person who has acquired the shares or stock options donates them to a charity. The charity may issue an official donation receipt for the fair market value of the gift.
  • No, if the corporation who issued them donates the shares or stock options.
Long answer

For purposes of the Income Tax Act, in order to make a gift, there must be an actual transfer of property. Where a corporation issues shares of its capital stock or grants a stock option, there is no transfer of property by the corporation, as the corporate assets have not been reduced as a result. Therefore, there is no “gift.” As a result, the charity should not issue a receipt even though the shares or options will normally have value.

Shares or other types of rights to stock that are not traded on a public Canadian stock exchange are generally excluded from the Income Tax Act provisions that permit receipting of donations of shares or rights to stock.

S12. Our charity received a donation of a life insurance policy. How should the receipt be issued?|

S12. Our charity received a donation of a life insurance policy. How should the receipt be issued?


Short answer

It depends on whether the life insurance policy was donated after or before death.

Long answer

Donated after death. For receipting purposes, the proceeds bequeathed represent the fair market value of the gift. So, a receipt for the value of the proceeds of the insurance policy can be issued.

Donated before death. When the taxpayer assigns his or her life insurance policy to a registered charity and the registered charity becomes the beneficiary, this is a transfer of property. A donation receipt can be issued. The amount of the donation is equal to the cash surrender value of the policy at the time of transfer plus any accumulated dividends and interest assigned at that time. If the policy has no cash surrender value, it is not considered a gift and the transfer cannot be receipted for tax purposes.

If the policy is not fully paid, the premiums have to be paid by the donor directly to the insurance company or a gift of an amount of money is made to the registered charity to provide for the payment of the premiums.

The future payment of premiums can constitute a gift and receipts can be issued.

Note

In an arrangement is where the charity pays the premiums out of a gift of money made by the donor, these payments constitute fundraising costs.

More…

For more information, see Income Tax Interpretation Bulletin IT-244R3 Gifts by individuals of life insurance policies as charitable donations.

S13. Our registered charity received a donation in the form of an RRSP death benefit. How should we issue the receipt?

S13. Our registered charity received a donation in the form of an RRSP death benefit. How should we issue the receipt?


Short answer

The proceeds of an RRSP death benefit may be bequeathed to the charity upon the death of the donor. For receipting purposes, the proceeds bequeathed represent the fair market value of the gift. A receipt may be issued for the fair market value.

Long answer

The annual contributions paid by the taxpayer until his or her death do not constitute charitable donations.

 

S14. Our registered charity received a donation of an artist's painting. How do we determine the amount for the official donation receipt?

S14. Our registered charity received a donation of an artist's painting. How do we determine the amount for the official donation receipt?


Short answer

The amount of the official donation receipt is the fair market value set by the artist.

Long answer

When an artist creates a work of art intending to sell it, but instead donates it to a qualified donee, the gift is considered to be a disposition of property from the artist’s inventory (that is, not capital property).

An artist can set the value of a gift from his or her inventory at any amount between the artist’s cost of time and materials and the work’s fair market value, provided that its fair market value is greater than its cost. If, at the time of the donation, the fair market value is less than the cost amount, the receipt must still equal the fair market value of the donated property as set by the artist.

As in the case of business inventory, the artist who donated the painting will have

  • an income of the value set by him or her
    and
  • a tax receipt for donation of the same amount.
More…

An artist’s donation may also be a work of cultural property (see FAQ D18).

To be sure, the charity should seek professional advice.

 

Who is the Donor?

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Issuing Receipts in Specific Situations - Who is the Donor?

S17. Our
charity has a donor that gives on a regular basis. Can we issue just one
donation receipt per tax year?

S18. Our
charity received an anonymous gift. Since we do not have a
name and address, do we have to issue a tax receipt? If we have to
issue a tax receipt for the donation, how should we do it?

S19. Our
charity received a donation by way of cheque written on an account
held jointly by spouses. To whom do we make out the receipt?

S20. Our
charity received a donation via cheque written on an account held
by a corporation. The individual who owns the corporation wants the
official donation receipt made out in his name. Can we do this?

S21. Our
charity received a donation from an individual who says that she is
the trustee for another individual and she wants the official donation
receipt to be made out in the name of that other individual. Can we do
this?

S22. When making a charitable donation, who does the Canada Revenue Agency recognize as a donor?

S23. Is it possible for me to make a donation to a registered charity in my adult child's name and have the tax receipt issued to her?

S24. What about a situation where a company collects money from its employees to make a group gift to a charity?

S25. We are a small registered charity. Recently, we received a donation, and the person providing the money asked that the receipt be issued to a person other than the provider. Can we do that?

S26. I am the owner of a small business that supports a registered company. Can I make a charitable donation by writing a cheque on my company's bank account but have our accountant issue a charitable receipt to me personally?

S27. What if a person wants to make a charitable donation to honour another person, in memory of a deceased person, or to make a gift to another person; for example the gift of digging a well in a poor village in Africa?

Additional Resources: CRA - Charities and Giving - Video Series - Gifting and Receipting
Learn more about gifting and receipting! This video series is intended to help qualified donees, including charities, to master the rules related to gifting and receipting using scenarios and questions and answers.

Who is the true donor of this gift?


S18. Our charity received an anonymous gift. Since we do not have a name and address, do we have to issue a tax receipt? If we have to issue a tax receipt for the donation, how should we do it?

S18. Our charity received an anonymous gift. Since we do not have a name and address, do we have to issue a tax receipt? If we have to issue a tax receipt for the donation, how should we do it?


Short answer

No. Your charity is not required to issue official donation receipts for all donations.

Long answer

Paragraph 3501(1)(g) of the Income Tax Regulations requires that an official donation receipt show the name and address of the donor (and for an individual, his or her first name and initial).

But the Canada Revenue Agency has made an administrative decision to allow registered charities to issue official donation receipts for anonymous gifts if these procedures are followed:

  • the donor establishes an agency or trust agreement to make the anonymous gift
  • the donor appoints an agent for the purpose of making a gift on his or her behalf
  • the agent agrees to hold the funds in trust for the donor
  • the donor directs the agent to make a gift to a registered charity on the donor’s behalf
  • the agent agrees to direct the registered charity to issue a receipt in the amount of the gift in the name of the agent in trust
    and
  • the agent agrees to deliver the receipt to the donor for the purpose of establishing the details of the donation

 

S19. Our charity received a donation by way of cheque written on an account held jointly by spouses. To whom do we make out the receipt?

S19. Our charity received a donation by way of cheque written on an account held jointly by spouses. To whom do we make out the receipt?


Short answer

The charity can issue a tax receipt in either or both names of the spouses, regardless of how the cheque is endorsed, when a charitable donation is provided by cheque written on a joint account.

Long answer

If the donor specifies the name of the spouse to appear on the receipt, then the receipt should be issued as instructed.

S20. Our charity received a donation via cheque written on an account held by a corporation. The individual who owns the corporation wants the official donation receipt made out in his name. Can we do this?

S20. Our charity received a donation via cheque written on an account held by a corporation. The individual who owns the corporation wants the official donation receipt made out in his name. Can we do this?


Short answer

No. Where a registered charity receives a cheque from a corporation, the charity must not issue the receipt to the individual who owns the corporation.

Long answer

The charity may only issue a receipt to an individual if there is evidence to show that the individual is the true donor. The donation would be, therefore,

  • from that individual's personal chequing account
    or
  • from a corporation in the name or on behalf of the individual.

In the second condition, the corporation should be able to show that the donation came from the shareholder's account.

S21. Our charity received a donation from an individual who says that she is the trustee for another individual and she wants the official donation receipt to be made out in the name of that other individual. Can we do this?

S21. Our charity received a donation from an individual who says that she is the trustee for another individual and she wants the official donation receipt to be made out in the name of that other individual. Can we do this?


Short answer

Yes, you can issue the receipt as long as you are sure that the donation is the property of the donor.

Long answer

An individual can act as trustee or agent for another in making a gift to a registered charity. The registered charity must be reasonably sure that the name it records on the receipt is that of the true donor. When in doubt, the charity should request from the trustee a written declaration of the identity of the true donor.

 

S17. Our charity has a donor that gives on a regular basis. Can we issue just ONE donation receipt per tax year?

P17. Un donateur fait régulièrement des dons à notre organisme de bienfaisance. Peut-on délivrer UN seul reçu de dons par année d’imposition?


Réponse courte

Peut-être, en fonction du type de don. Un organisme de bienfaisance peut délivrer un reçu officiel cumulatif pour l’année aux fins de l’impôt pour un don fait en espèces. On doit délivrer des reçus individuels pour les dons en nature.

Fundraising Context

Issuing Receipts in Specific Situations - Fundraising Context

S28. If our registered charity has a fundraising event where door prizes are included with tickets, can we issue official donation receipts? If so, for how much?

S29. If our registered charity has a fundraising event where tickets are sold at a price higher than the fair market value of a similar event, can we issue receipts? If so, for how much?

S30. Will the attendance of a celebrity at our fundraising event affect the donation amount on the tax receipts?

S31. Our registered charity sold lottery tickets. Can we issue donation receipts for the ticket and if so, for how much?

S32. Is the amount paid for a raffle ticket a “gift” and, if so, what is the amount on the receipt?

S33. Can property donated for sale at an auction be considered a gift?

S34. Can a successful bidder at an auction receive a tax receipt for donation for the amount in excess of the fair market value that he or she pays?

S35. Can ourcharity issue an official donation receipt to the donor for the appraised value of donated goods if they are sold at auction for less than this amount?

S36. Can an individual who purchases a service at an auction be entitled to a donation receipt for the amount paid that is more than the value of the service received?

S37. A business bought a block of tickets for our golf tournament with money collected from its employees. Should we issue the tax receipt in the name of the golfers who use the tickets or in the name of the business?

S38. Can a receipt be issued to participants in a fundraising golf tournament?

S39. An organization that is not a registered charity asked to use our registered charity registration number for their fundraising event. Can we do this?


S28. If our registered charity has a fundraising event where door prizes are included with tickets, can we issue official donation receipts? If so, for how much?

S28. If our registered charity has a fundraising event where door prizes are included with tickets, can we issue official donation receipts? If so, for how much?


Short answer

It depends.

To find out the amount of the official donation receipt, if any, your charity must

  • determine if there was an advantage

If yes,

  • ensure that the advantage does not exceed the intention to make a gift threshold
  • determine whether the advantage exceeds the de minimis threshold
  • subtract the fair market value of the advantage from the fair market value of the donation

Example

A registered charity holds a fundraiser golf tournament and sells 100 tickets.

  • Essential elements:
    Ticket price $300
    Green fees $75
    Cart rental &nbsp$25
     Food and beverage $50
    Door prize total value $3,500 $35 average per participant
  • What is the fair market value of the donation? $300.00
  • Is there an advantage? Yes, door prizes, golf balls, green fees, the cart rental, and the food and beverages
  • At first glance, what is the fair market value of the advantage?
    • door prizes, averaging $35 per participant
    • green fees, cart rental, food and beverage valued at $150
  • Are the prizes and complementary items de minimis? Should they therefore be excluded in the calculation of the advantage?
  • Door prizes: $35 per person
  • Total advantage for the purposes of de minimis rule = $35
  • Total property transferred is $300 (ticket price): de minimis threshold is the lesser of 10 per cent of $300 ($30) or $75, so it is $30
  • $35 advantage exceeds $30 de minimis threshold
  • The door prizes are not de minimis and the amount must be included as an advantage
  • Items that are part of the purpose of the event, in this case the green fees, the cart rental, and the food and beverages are not included in the de minimis calculation.
  • But does it meet the intention to make a gift threshold? Yes.
    • Does the amount of the advantage received by the donor exceed 80 per cent of fair market value of total property transferred?
    • Total property transferred = $300 ticket price
    • Intent to give threshold = $300 x 80% = $240
    • Amount of advantage =
      $150 (green fees, cart rental, food and beverage)
      +$35 (prizes)
      $185 (total advantage)
  • An official donation receipt can be issued with an eligible amount of $115
    $300 (fair market value of donation)
    - $185 (fair market value of advantages)
    $115 (eligible amount)
More…

For more detail on golf tournaments, see

S29. If our registered charity has a fundraising event where tickets are sold at a price higher than the fair market value of a similar event, can we issue receipts? If so, for how much?

S29. If our registered charity has a fundraising event where tickets are sold at a price higher than the fair market value of a similar event, can we issue receipts? If so, for how much?


Short answer

Maybe. If there is clear evidence that the ticket price is sufficiently in excess of the usual or comparable ticket price, this means that there may be an eligible amount for donation. To determine the eligible amount for an official donation receipt, your charity has to apply the intention to make a gift threshold and the de minimis threshold for the advantage received. If the amount of the advantage is not de minimis—that is, more than the guideline—and is less than 80 per cent of the actual ticket price, you may issue an official donation receipt for the difference. The example illustrates the calculation.

If there is no reasonably comparable event, then no part of the ticket price can be considered as an eligible amount for donation.

Example

  • Tickets are sold for $200 each to a fundraising concert featuring a well-known performer;
  • Each participant receives a T-shirt that normally sells for $20 and a CD that retails at $15;
  • The same performer had put on a similar (and non-fundraising) concert six months earlier and the ticket price was $100;

Calculations

The total value of the complementary items is $35. Since $35 exceeds the lesser of 10 per cent of $200 ($20) and $75, it is not de minimis. Accordingly, the complementary items are regarded as an advantage and must be taken into account in determining the eligible amount for donation.

  • Actual ticket price $200 less comparable non-charity ticket price of $100 and advantage of $35 ($200 - $135) brings the eligible amount for a receipt to $65.
  • Since the amount of the advantage ($135) does not exceed 80 per cent of the actual ticket price (80% x 200 = $160), a tax receipt for the donation may be issued for $65.

S30. Will the attendance of a celebrity at our fundraising event affect the donation amount on the tax receipts?

S30. Will the attendance of a celebrity at our fundraising event affect the donation amount on the tax receipts?


Short answer

No. The mere attendance of celebrities at fundraising events is not viewed as an advantage. So it will not be included in the calculation of the amount on your official donation receipt.

Long answer

While the mere attendance of a celebrity at an event does not change how the event should be receipted, where an additional incremental amount is paid for the right to participate in an activity with a particular individual, this payment is not treated as a gift. For example, at a golf tournament, if a supporter pays extra so he or she can play a round with a well-known sports figure, that is an advantage that must be taken into account in any official donation receipt provided to the supporter. If the celebrity is merely attending the event along with the supporter, this will not have an impact on the amount of the supporter’s official donation receipt.

S31. Our registered charity sold lottery tickets. Can we issue donation receipts for the ticket and if so, for how much?

S31. Our registered charity sold lottery tickets. Can we issue donation receipts for the ticket and if so, for how much?


Short answer

No. A gift requires an intention to make a gift.

Long answer

Participants in lotteries, while perhaps influenced by the identity of your charity, are mainly motivated by the chance to win prizes. In some cases, while there may be an element of an intention to make a gift, the advantage cannot be reasonably quantified. Therefore, no part of the cost of a lottery or raffle ticket is a gift that may be receipted for income tax purposes.

S32. Is the amount paid for a raffle ticket a gift and, if so, what is the amount on the receipt?

S32. Is the amount paid for a raffle ticket a gift and, if so, what is the amount on the receipt?


Short answer

It depends.

Long answer

If participation in the raffle is included in the participation fee of a fundraising event such as a banquet, the prizes will be treated as door prizes and the value of the various prizes to be won is included in determining the amount of the advantage.

Where the raffle is conducted separately, the cost of raffle tickets is not considered a gift (as it is essentially a lottery) and the value of the various prizes is not taken into account in determining the amount of the advantage.

S33. Can property donated for sale at an auction be considered a gift?

S33. Can property donated for sale at an auction be considered a gift?


Short answer

Yes. In order for there to be a gift for the purposes of the Income Tax Act, there must be a voluntary transfer of property to the charity. How a charity uses donated property is generally not relevant in determining whether the donor has made a gift to the charity.

More…

See also FAQ S33

S34. Can a successful bidder at an auction receive a tax receipt for donation for the amount in excess of the fair market value that he or she pays?

S34. Can a successful bidder at an auction receive a tax receipt for donation for the amount in excess of the fair market value that he or she pays?


Short answer

Yes. As long as these requirements are met:

  • the value of the item can be determined and
  • the value was posted before the start of the auction
  • the value of the advantage does not exceed the intention to make a gift threshold, that is, 80 per cent of the price paid
  • the value of the advantage does exceed the de minimis threshold

Example

A sports store donates a mountain bike to a charity and that charity puts it up for auction. The fair market value of the bike is $400 and this amount is posted with the item. There is a successful bid of $600.

    To determine the amount of the official donation receipt  
    Bid price $600
    There is an advantage, that is, the value of the bike for $400 ($400)
    Yes, it meets the intention to make a gift threshold:  
    80 per cent of the bid price, which is $480
     
    The value of the advantage is less than 80 per cent of the bid price
     
    Yes, it meets the de minimis threshold, that is 10 per cent of the bid price or $75, whichever is less  

    The threshold is $60 (10 per cent of $600).

     
    The value of the advantage exceeds the de minimis threshold
     
    Excess of the bid price over the value of the advantage (the bike) $200

     

    An official donation receipt can be issued for $200.
     

    The sports store donating the bike will be entitled to receive a tax receipt for $400. If this represents a gift on the part of the retailer, the retailer will have revenue of $400 pursuant to section 69 and a donation deduction of $400. If the bike cost the retailer $250, the result would be a profit of $150 for tax purposes.

Exception

The Canada Revenue Agency has indicated that, with respect to certain personal items such as the jersey of a hockey player or the right to play golf or dine with a particular person, the value will be the amount of the bid. No donation tax receipt is, therefore, to be issued.

S35. Can our charity issue an official donation receipt to the donor for the appraised value of donated goods if they are sold at auction for less than this amount?

P35. Notre organisme de bienfaisance peut-il délivrer un reçu officiel de don au donateur pour la valeur estimative des biens donnés s’ils sont vendus dans une vente aux enchères pour moins que ce montant?


Réponse courte

Oui.

Réponse détaillée

Dans la mesure où la valeur estimative reflète fidèlement la juste valeur marchande des biens au moment où ils sont donnés à votre organisme de bienfaisance, un reçu officiel de don du montant de la valeur estimative peut être délivré au donateur. Le prix de l’enchère acceptée n’est aucunement un facteur dans la détermination de la juste valeur marchande du don.

S36. Can an individual who purchases a service at an auction be entitled to a donation receipt for the amount paid that is more than the value of the service received?

S36. Can an individual who purchases a service at an auction be entitled to a donation receipt for the amount paid that is more than the value of the service received?


Short answer

Yes. Where the service has a clearly established fair market value that has been identified to all bidders at the auction before the opening bid, an official donation receipt can be issued to the purchaser of the service for the “eligible amount” where there is an intention to make a gift.

Long answer

The eligible amount is the difference between the amount paid (bid amount) and the amount of advantage received (that is, the value of the service). For example, if an individual successfully bid $40 for a haircut valued at $25, the eligible amount would be $15.

S37. A business bought a block of tickets for our golf tournament with money collected from its employees. Should we issue the tax receipt in the name of the golfers who use the tickets or in the name of the business?

S37. A business bought a block of tickets for our golf tournament with money collected from its employees. Should we issue the tax receipt in the name of the golfers who use the tickets or in the name of the business?


Short answer

The charity should always issue a receipt in the name of whomever buys or paid for the tickets. The receipt cannot be issued in the name of the business since the employees paid for the tickets.

Long answer

If the business provides the charity with the list of golfers who paid for the tickets, the charity can issue a receipt in the name of each golfer.

S38. Can a receipt be issued to participants in a fundraising golf tournament?

S38. Can a receipt be issued to participants in a fundraising golf tournament?


Short answer

Yes, if the price of the ticket to participate in the golf tournament is more than the cost of playing. The amount on the tax receipt is based on the value of the advantage and the de minimis threshold.

Long answer

Calculation of the amount of receipts for an event such as a golf tournament can be complex, and charities undertaking this type of fundraising should familiarize themselves with the factors that can have an impact on the amount of the receipt.

For more information on this topic, see FAQ S28 and

S39. An organization that is not a registered charity asked to use our registered charity registration number for their fundraising event. Can we do this?

S39. An organization that is not a registered charity asked to use our registered charity registration number for their fundraising event. Can we do this?


Short answer

No. Under no circumstances should a registered charity lend its registration number to another organization for receipting purposes. You—the registered charity—are responsible for all tax receipts issued under your name and number and must account for the corresponding donations on your annual information return. If you lend your registration number, you could lose your charitable registration.

Enduring Property

Receipting - Enduring Property


Notice to the Reader
As a result of Budget 2010, the information on this page applies only for fiscal periods ending before March 4, 2010.

EP1. What is included in enduring property?

EP2. When are gifts of enduring property (excluding inter-charity transfers) included in a registerd charity's disbursement quota?

EP3. If a charity receives enduring property from a registered charity, is their a disbursement quota obligation for the recipeint charity?

EP4. If a charity transfers enduring property which it received as a specified gift, is there a disbursement quota obligation for that donor charity?

EP5.If a charity transfers enduring property as a specified gift, is there a disbursement quota obligation for the ceipient charity?

EP6. What is a bequest?

EP7. When a individual makes a gift through his or her will, when is the gift deemed to have been made?

EP8. Can a charity issue a receipt prior to the transfer of property by the deceased's estate?

EP9. If a will allows trustees to decide on the way property is disposed, either to a charity or to another organization, can a donation receipt be issued for the property that the trustees donate to a charity?

EP10. If the terms of a person's will specify that property be used to establish a charitable foundation, can a donation receipt be issued if the charity is registered?

EP11. Can a deceased individual obtain an official receipt for tax purposes when a charity had been designated as a beneficiary of a registered retirement income fun?

EP1. What is included in enduring property?

Notice to the Reader
As a result of Budget 2010, the information on this page applies only for fiscal periods ending before March 4, 2010.

EP1. What is included in enduring property?

While there are some specific exceptions, enduring property of a registered charity generally includes:

A gift received by way of bequest or inheritance
may include direct distributions of proceeds to a registered charity that is the designated beneficiary of a life insurance policy, a registered retirement savings plan, or a registered retirement income fund.

A gift received by a charitable organization from another registered charity that is subject to a trust or direction to the effect that the property given, or property substituted for the gift,
is to be held by the charitable organization for a period of not more than five years from the date the gift was received and is to be expended in its entirety over the period referred to in the trust or direction to acquire a tangible capital property to be used in charitable activities or administration; and/or in the course of a program of charitable activities of the charitable organization that could not reasonably be completed before the end of the first fiscal period following the fiscal period in which the gift was received.

A gift received by a charity that is subject to a trust or direction to the effect that the property given, or property substituted for the gift, is to be held by the charity for a period of not less than 10 years (a “10-year gift”)
The trust or direction may permit the charity to transfer the enduring property to another registered charity (the “transferee charity”), subject to the same terms and conditions of the original gift. It may also permit the charity, or the transferee charity, to expend such amount of the gift or the substituted property before the end of that period, to the extent necessary to meet the 3.5 per cent disbursement quota requirement.

A gift received by a charity from another charity
that was a bequest or inheritance of the other charity or a ten-year gift of the other charity, and in the case of a ten-year gift, is subject to the same terms and conditions of the original gift.


(Reprinted with permission from Info Sheet #12 Enduring Property by Charities Files)

EP2. When are gifts of enduring property (excluding inter-charity transfers) included in a registered charity's disbursement quota?

Notice to the Reader
As a result of Budget 2010, the information on this page applies only for fiscal periods ending before March 4, 2010.

EP2. When are gifts of enduring property (excluding inter-charity transfers) included in a registered charity’s disbursement quota?

Gifts of enduring property (for example, bequests or 10-year gifts) are only included in the disbursement quota when a charity spends or transfers some or all of this enduring property. However, such gifts must be considered when calculating the average value of property for a charity’s 3.5 per cent disbursement quota requirement.

(Reprinted with permission from Info Sheet #12 Enduring Property by Charities Files)

EP3. If a charity receives enduring property from a registered charity, is there a disbursement quota obligation for the recipient charity?

Notice to the Reader
As a result of Budget 2010, the information on this page applies only for fiscal periods ending before March 4, 2010.

EP3. If a charity receives enduring property from a registered charity, is there a disbursement quota obligation for the recipient charity?

Enduring property (for example, a 10-year gift) received from another charity is generally excluded from the recipient’s disbursement quota in the year it is received. When the recipient charity spends or transfers some or all of its enduring property, the amount spent or transferred must be included when calculating the disbursement quota (unless it was received as a specified gift). The recipient charity must also consider enduring property when calculating average value of property for its 3.5 per cent disbursement quota requirement.

For more information on ten (10) year gifts see:
www.cra-arc.gc.ca/chrts-gvng/chrts/prtng/gfts/10gft-eng.html
)

(Reprinted with permission from Info Sheet #12 Enduring Property by Charities Files)

EP4. If a charity transfers enduring property which it received as a specified gift, Is there a disbursement quota obligation for that donor charity?


Notice to the Reader
As a result of Budget 2010, the information on this page applies only for fiscal periods ending before March 4, 2010.

EP4. If a charity transfers enduring property which it received as a specified gift, is there a disbursement quota obligation for that donor charity?

No. Enduring property that was received as a specified gift is excluded from the donor charity’s disbursement quota. There are errors in the (’05) version of Form T3010A regarding the reporting of enduring property and specified gifts. Since Form T3010A is not being revised this year, Guide T4033A, Completing the Registered Charity Information Return, will be amended to instruct charities in such circumstance to include the amount on line 4920 “Other expenditures,” and on line 5000 “Total charitable programs expenditures” included in line 4950.

(Reprinted with permission from Info Sheet #12 Enduring Property by Charities Files)

EP5. If a charity transfers enduring property as a specified gift, is there a disbursement quota obligation for the recipient charity?


Notice to the Reader
As a result of Budget 2010, the information on this page applies only for fiscal periods ending before March 4, 2010.

EP5. If a charity transfers enduring property as a specified gift, is there a disbursement quota obligation for the recipient charity?

No. Enduring property received as a specified gift is excluded from the recipient charity’s disbursement quota. The charity should include the amount on line 4510 “Total amount received from other registered charities” and on line 4520 “Total specified gifts” in line 4510 of Form T3010A (05).

The donor charity cannot use the specified gift to satisfy its own disbursement quota.

Specified gifts should be identified as such in the books and records of the donor charity and recipient charity.

(Reprinted with permission from Info Sheet #12 Enduring Property by Charities Files)

EP6. What is a bequest?

EP6. What is a bequest?

A bequest is property that a registered charity receives from the will of a deceased person. Under the Income Tax Act, a bequest is a gift of enduring property. Bequests are generally excluded from a charity's disbursement quota in the year they are received. However, the charity must consider these gifts when calculating the average value of property for its 3.5 per cent disbursement quota requirement. Also, bequests must be included in calculating the charity's disbursement quota in the year in which they are spent or transferred to a qualified donee.

(Reprinted with permission from Info Sheet #12 Enduring Property by Charities Files)

EP7. When an individual makes a gift through his or her will, when is the gift deemed to have been made?

==en==

EP7. When an individual makes a gift through his or her will, when is the gift deemed to have been made?

Under subsection 118.1(5) of the Act, “…where an individual by the individual’s will makes a gift, the gift is, for the purpose of this section, deemed to have been made by the individual immediately before the individual's death.

For gifts in kind, the value of the gift is considered to be its fair market value immediately before death and not when the property is subsequently received by the charity.

(Reprinted with permission from Info Sheet #12 Enduring Property by Charities Files)

EP8. Can a charity issue a receipt prior to the transfer of property by the deceased’s estate?

EP8. Can a charity issue a receipt prior to the transfer of property by the deceased’s estate?

No. A donation tax credit can, however, still be claimed on the deceased taxpayer’s final return. Where the charity receives a letter from the estate advising of the gift and its value, the registered charity can issue a letter to the estate acknowledging the gift and stating that it will accept the gift.

(Reprinted with permission from Info Sheet #12 Enduring Property by Charities Files)

EP9. If a will allows trustees to decide on the way property is disposed, either to a charity or to another organization, can a donation receipt be issued for the property that the trustees donate to a charity?

EP9. If a will allows trustees to decide on the way property is disposed, either to a charity or to another organization, can a donation receipt be issued for the property that the trustees donate to a charity?

Yes. Where the trustees exercise their discretion to donate property to a charity, a receipt can be issued for the fair market value of the property and a donation tax credit may be claimed on the trust return filed by the estate.

A donation tax credit can be claimed on the deceased taxpayer’s final return where the terms of the will provide that a donation of a specific property, a specific amount, or a specific percentage or part of the residue of the individual’s estate is to be gifted to a charity.

In a situation where the individual’s will directs his or her trustee to make a donation to charity without identifying a particular charity, this, in itself, does not stop the donation from qualifying as a gift by will.

(Reprinted with permission from Info Sheet #12 Enduring Property by Charities Files)

EP10. If the terms of a person’s will specify that property be used to establish a charitable foundation, can a donation receipt be issued if the charity is registered?

EP10.If the terms of a person’s will specify that property be used to establish a charitable foundation, can a donation receipt be issued if the charity is registered?

Yes. The fact that the foundation did not exist at the time of the individual's death does not rule out a donation from qualifying as a gift “by will” for the purposes of subsection 118.1(5) of the Act as long as the foundation is a qualified donee when the gift is completed. The completion of the gift should occur within a reasonable period after the death.

(Reprinted with permission from Info Sheet #12 Enduring Property by Charities Files)

EP11. Can a deceased individual obtain an official receipt for tax purposes when a charity has been designated as a beneficiary of a registered retirement income fund?

EP11.Can a deceased individual obtain an official receipt for tax purposes when a charity has been designated as a beneficiary of a registered retirement income fund?

Yes. Under the Income Tax Act, a charitable donation tax credit can be claimed on a deceased individual's return for a donation of a direct distribution of proceeds to a qualified donee who is the designated beneficiary of a registered retirement savings plan (RRSP), a registered retirement income fund (RRIF), or a life insurance policy, provided certain conditions are met.

(Reprinted with permission from Info Sheet #12 Enduring Property by Charities Files)

Disbursement Quota

DQ1. What is a Disbursement Quota?

DQ1. What is a Disbursement Quota?

A Disbursement Quota is the minimum amount a registered charity is required to spend each year on its own charitable activities or on gifts to qualified donees (for example, other registered charities). The disbursement quota calculation is based on the value of the property that a charity possesses that is not used for charitable activities or administration.

For more information, visit www.cra-arc.gc.ca/chrts-gvng/chrts/chcklsts/dqb-eng.html

DQ2. What is property that is not directly used in charitable activities or administration?

CV2. Qu’est-ce que « des biens non utilisés directement dans des activités de bienfaisance ou pour l’administration »?

Ces sortes de biens comprennent notamment les biens immobiliers, tel que terrains et édifices (mis à part l’immeuble où est situé l’organisme de bienfaisance), ou les placements tel que l’encaisse dans des comptes en banque, les actions, les obligations, les fonds communs de placement et les certificats de placement garantis.

DQ3. How much is a registered charity required to spend to meet its disbursement quota, and when is it required to spend it?

DQ3. How much is a registered charity required to spend to meet its disbursement quota, and when is it required to spend it?

Short Answer

With the passing of the 2010 federal government budget, registered charities are now required to spend an amount equal to 3.5% of their investment assets each year if their total investment assets equal or exceed a threshold amount of $100,000. For charitable foundations, the threshold amount is $25,000. This is called the Capital Accumulation Rule. The Canada Revenue Agency has issued new guidelines to help registered charities calculate the DQ for fiscal years that end on or after March 4, 2010.

Long Answer

The expenditure obligation applies to assets held by registered charities that are not used directly in their charitable work or administration. These assets include, for example, endowments and other investments or capital accumulations. A registered charity must, subject to certain exceptions, spend at least 3.5% of the average value of such assets annually, if their total investment assets equal or exceed $100,000.

DQ4. What about the accumulation of capital for a particular purpose such as a building project?

DQ4. What about the accumulation of capital for a particular purpose such as a building project?

This is an exception as mentioned in DQ2. The Canada Revenue Agency has the discretion to exclude accumulated property for a particular purpose from the Capital Accumulation Rule calculation.

DQ5. How does a charity go about accumulating property outside of its disbursement quota?

DQ5. How does a charity go about accumulating property outside of its disbursement quota?

Short Answer

If a charity is saving for a particularly large expenditure for a particular purpose, it can request permission from the Canada Revenue Agency to temporarily accumulate funds. Your charity might be planning to buy a building or an expensive piece of equipment. With written permission from the Canada Revenue Agency, it can then postpone the disbursement of funds for this particular purpose, within a designated time frame.

Long Answer

Registered charities can apply funds toward meeting its disbursement quota even while it is accumulating them. However, it must receive permission from the Canada Revenue Agency to do so.

DQ6.How does a charity obtain the required permission from the Canada Revenue Agency?

DQ6. How does a charity obtain the required permission from the Canada Revenue Agency?

To apply to accumulate property, registered charities can visit the Canada Revenue Agency website and write a letter of request. The request must include the following information:

  • the specific purpose for which the funds will be used;
  • the amount required;
  • the length of time needed to accumulate the funds (minimum 3 years and maximum 10 years);
  • the signature of a director/trustee or other authorized representative of the charity;
  • the name and the registration number of the charity;
  • the effective (starting) date.

If the request is approved, the registered charity will receive a letter confirming the amount that it can accumulate, the specific purpose for which the approval is granted, and the number of years that the accumulation can continue.

For more information visit: www.cra-arc.gc.ca/chrts-gvng/chrts/prtng/rqsts/ccmlt-eng.html

DQ7. What if something goes wrong and the registered charity can’t meet the conditions in the letter of permission?

DQ7. What if something goes wrong and the registered charity can’t meet the conditions in the letter of permission?

The Charities Directorate advises that if a registered charity fails to meet the terms and conditions of the permission to accumulate or if circumstances change and the accumulation must be abandoned, the unused accumulated amount and any income earned on the accumulated amount must be included in the calculation of the charity’s disbursement quota for that year.

The unused accumulated amount must be included as property not currently used in charitable activities or administration, to calculate the amount to report. If the charity needs more time to accumulate funds or wants to change the approved amount, it must apply in writing to the Charities Directorate.

DQ8. How should a registered charity calculate its disbursement quota?

DQ8. How should a registered charity calculate its disbursement quota?

The Charities Directorate advises that if the average value of a registered charity’s property not used directly in charitable activities or administration during the 24 months before the beginning of its fiscal period exceeds $100,000, the charity’s disbursement quota is 3.5% of the average value of that property.

For more information, visit www.cra-arc.gc.ca/chrts-gvng/chrts/prtng/spndng/clclb-eng.html

DQ9. Is there any information available to help registered charities figure out their disbursement quotas?

DQ9. Is there any information available to help registered charities figure out their disbursement quotas?

Yes. There is valuable information about the disbursement quota in the Canada Revenue Agency’s Guide T4033-1-10e. It is available at www.cra-arc.gc.ca/E/pub/tg/t4033-1. Pages 23, 24 and 25 deal specifically with disbursement quotas, and set outincluding how to calculate the disbursement quota and examples.

See also a CRA document entitled Meeting the Disbursement Quota, which contains a helpful checklist. It can be found at www.cra-arc.gc.ca/chrts-gvng/chrts/chcklsts/dqb-eng.html. The checklist is for the charity’s use only and should not be filed with the charity’s return.

DQ10. What happens if a registered charity spends less than the disbursement quota in its fiscal year?

DQ10. What happens if a registered charity spends less than the disbursement quota in its fiscal year?

The Charities Directorate advises that if a registered charity spends less than the disbursement quota for a year, this is known as a disbursement shortfall. A registered charity can draw on disbursement excesses from the five previous fiscal periods to help it meet a shortfall. If there are no excesses available to draw on, the charity can try to spend enough the following year to create an excess that it can carry back to cover the shortfall. It is important to note that continuous shortfalls can lead to the revocation of a charity’s registration.

DQ11. Is there any other help available to a registered charity if it has a spending shortfall?

DQ11. Is there any other help available to a registered charity if it has a spending shortfall?

A disbursement quota reduction may be available to registered charities whose expenditures on charitable activities or on gifts to qualified donees were less than required in the year if the charity faced circumstances beyond its control.

See http://www.cra-arc.gc.ca/chrts-gvng/chrts/prtng/spndng/shrtxcss-eng.html for more information.

DQ12.How does a registered charity obtain a disbursement quota reduction?

DQ12. How does a registered charity obtain a disbursement quota reduction?

To ask for a reduction complete Form T2094 – Registered Charities: Application to Reduce Disbursement Quota. www.cra-arc.gc.ca/E/pbg/tf/t2094/README.html

The Charities Directorate will only consider the application once a registered charity has exhausted all other available means to cover the shortfall, such as:

  • applying any available excesses from the previous five years to cover the shortfall; and/or
  • creating a disbursement quota excess in the next year and carrying it back to cover the shortfall.

Generally, the earliest that a charity can receive approval for a disbursement quota reduction is after the Canada Revenue Agency has issued a Registered Charity Information Return Summary for the fiscal period following the period in which the shortfall occurred.

DQ13. What happens next after a registered charity receives approval to reduce its disbursement quota?

DQ13. What happens next after a registered charity receives approval to reduce its disbursement quota?

After receiving approval to reduce its disbursement quota, a registered charity must amend its T3010 return for the fiscal period in which the shortfall occurred to include the new approved amount.

To amend the return, the charity must complete Form T1240: Registered Charity Adjustment Request www.cra-arc.gc.ca/E/pbg/tf/t1240/README.html. After the adjustment has been processed, the charity will receive a revised Registered Charity Information Return Summary for that fiscal period.

DQ14. What if a charity spends more than the disbursement quota in its fiscal year?

DQ14. What if a charity spends more than the disbursement quota in its fiscal year?

If a registered charity spends more on its charitable activities or by way of gifts to qualified donees than the disbursement quota in its fiscal year, this is known as a disbursement excess. Disbursement excesses can be carried forward for five years or carried back one year.