2009-0307941E5 dealt with two donors (not dealing with each other at arm’s length) who each made a cash gift to the same donee, and with one of the donors using part of the gift (as a result of the loan-back to it of gifted cash) as described in s. 118.1(16)(c)(ii). This resulted in a reduction not only in the amount of the gift made by that donor, but also by the other. CRA stated:
Subsection 118.1(17) of the Act applies on a taxpayer by taxpayer basis and as such, where multiple individuals gift to a qualified donee and a person with which these individuals do not deal at arm's length uses property of the donee and the property was not used in the carrying on of the donee's charitable activities, the provision will be applied to each donor separately. Accordingly where two donors, who do not deal at arm's length with each other, each make a gift of cash to a charity and an amount is loaned back by the charity to one of the donors, the amount of the loan appears to be taken into account in determining the deemed fair market value of the gift made by each of the donors. We have brought this result to the attention of the Department of Finance … .
…[T]he Act does not provide for the reinstatement of a gift … in the event the property used by the donor or person not dealing at arm's length with the donor is returned to the charity.