Principal Questions: Whether the existing administrative position to allow a charitable gift made by will to be included in the “total charitable gifts” of the deceased individual's spouse or common law partner will continue to apply as of the 2016 taxation year?
Position Taken: No.
Reasons: Clause (c)(i)(C) of the definition of "total charitable gifts" in subsection 118.1(1) does not refer to gifts made by the estate of an individual's spouse or common-law partner.
Ordre des CPA du Québec - Table ronde sur la fiscalité des particuliers
Colloque du 21 janvier 2016
Question 8
Spousal sharing of charitable gifts made by will
The Canada Revenue Agency ("CRA") and Revenu Québec ("ARQ") administratively accept that donations made by a taxpayer can be treated as gifts made by a spouse or partner for the purposes of the definition of "total charitable gifts" in subsection 118.1(1) of the Income Tax Act ( "ITA") and section 752.0.10.1 of the Quebec Taxation Act ("TA"). This policy also applies to gifts made by will.
For deaths occurring after 2015, donations made by will no longer will be deemed to be made by an individual immediately before death, but instead will be deemed to be made by the estate at the time that the property which is the subject of the gift is transferred to a qualified donee (new paragraph 118.1(5)). As part of the 2014 budget, the Québec Minister of Finance announced an amendment to the TA to harmonize with this new rule.
Amendments have been made to subsection 118.1(1) to legislate the administrative policy regarding the sharing of gifts between spouses for the 2016 and subsequent years. Thus, a gift made by an individual other than a trust will include a gift made by the individual, by the individual’s spouse or the individual’s common-law partner, in the particular year or any of the five preceding taxation years, all in conformity with the current administrative policy of the CRA.
However, the amendment to the definition of "total charitable gifts" in subsection 118.1(1) ensures that when a donation is deemed to be made by a "graduated rate estate" (footnote 1) of an individual, this gift can be claimed by the deceased in the year of death or the immediately preceding year.
Question to the CRA
For deaths occurring after 2015, will it be possible to include donations made by the estate of an individual in donations made by the surviving spouse or common-law partner in the particular year or any of the five preceding taxation years?
CRA Response
On 15 January 2016, the Department of Finance, following consultations, released legislative proposals which, among other things, allowed for greater flexibility in the application of tax rules for recognizing gifts made by the estate of an individual. All reference to legislative proposals reference these proposals.
The administrative practice of the CRA with respect to the sharing of gifts between spouses has now been adopted in clause (c)(i)(A) of the definition of "total charitable gifts" in subsection 118.1(1), but only for gifts made during the lifetime of an individual. The rules relating to gifts made in connection with an individual’s death after 2015 have been modified as discussed below.
Where an individual is not a trust, clause (c)(i)(C) of the proposed definition of "total charitable gifts" in subsection 118.1(1) states that the total charitable gifts of the individual for a particular taxation year includes the "eligible amount of a gift" (footnote 2) for which the following conditions are satisfied:
- the gift is made by the individual's estate;
- proposed subsection 118.1(5.1) applies to the gift; and
- the particular year is the taxation year of the individual's death or the preceding taxation year.
Subsection 118.1(5.1) as proposed applies to a gift made by the estate of an individual if the individual dies after 2015, and either the gift is deemed by subsection 118.1(5.2) to have been made in respect of the death, or the subject of the gift is property that was acquired by the estate on and as a consequence of the death (or is property that was substituted for that property.)
In order for proposed subsection 118.1(5.1) to apply, the gift must also have been made by the individual's estate at a time:
- that follows the death of the taxpayer by no more than 60 months; and
- at which the estate meets the requirements set out in paragraphs (b) to (e) inclusive of the definition of "graduated rate estate " in subsection 248(1).
Since proposed clause (c)(i)(C) above does not include a gift made by the estate of a spouse or common-law partner, we are of the view that the total charitable gifts of a surviving spouse or common-law partner for a taxation year or any of the five preceding taxation years, will not include the eligible amount of a gift made by such an estate. Therefore, following these amendments, the administrative practice respecting gifts made in the context of the death of an individual no longer applies for deaths after 2015.
Marie-Claude Routhier
(613) 670-8921
January 21, 2016
2016-062485