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?
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
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.
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.