Principal Issues:
1) Whether the transfer of land by a corporate partnership to a Canadian charity will qualify as a gift for tax purposes.
2) Whether the proposed transaction results in the conferral of an advantage to the donor.
Position:
1) Yes, based on the facts provided.
2) Not in this case.
Reasons:
For the purposes of determining the eligible amount of the gift by the donor under proposed subsection 248(31), it is our view that the proposed transaction will not result in the conferral of an advantage to the donor under proposed subsection 248(32).
XXXXXXXXXX 2007-024709
XXXXXXXXXX , 2008
Re: XXXXXXXXXX
XXXXXXXXXX
Advance Income Tax Ruling
This is in reply to your letter dated XXXXXXXXXX in which you requested an advance income tax ruling on behalf of the above-noted taxpayers. We also acknowledge the additional information provided in subsequent correspondence and during our various telephone conversations in connection with your request.
You advise that to the best of your knowledge and that of the taxpayers referred to above, none of the issues involved in the ruling request:
i. is in an earlier return of the taxpayers or a related person;
ii. is being considered by a tax services office or tax centre in connection with a previously filed tax return of the taxpayers or a related person;
iii. is under objection by the taxpayers or a related person;
iv. is before the courts or, if a judgment has been issued, the time limit for appeal to a higher court has not expired; and
v. is the subject of a ruling previously issued to the taxpayers by the Directorate.
Unless otherwise stated, all references to a statute are to the provisions of the Income Tax Act, R.S.C. 1985, 5th Supplement, c.1, as amended, (the "Act") and all terms and conditions used herein that are defined in the Act have the meaning given in such definition unless otherwise indicated.
Our understanding of the relevant definitions, facts, the proposed transaction and its purpose are set out below.
Definitions
(a) "Partnership" means: XXXXXXXXXX
(b) "Charity" means: XXXXXXXXXX
(c XXXXXXXXXX
(d) "CRA" means: the Canada Revenue Agency;
(e) "A Co" means: XXXXXXXXXX ; and
(f) "B Co" means: XXXXXXXXXX .
Facts
1. A Co and B Co are the corporate partners of the Partnership. The address of these entities is XXXXXXXXXX .
2. The Partnership owns a property located at XXXXXXXXXX
3. The Partnership has recently undertaken industrial development activities on the portion of this property that is no longer required for the XXXXXXXXXX .
4. XXXXXXXXXX
5. XXXXXXXXXX
6. The authorization lists a number of conditions that require the Partnership to carry out various habitat restoration activities.
7. Paragraph 39 of the authorization states the following:
"XXXXXXXXXX ."
8. XXXXXXXXXX , has confirmed that the commitment to donate this property was a voluntary action offered by the Partnership and not intended as a requirement of the XXXXXXXXXX authorization. The inclusion of this clause in the authorization was simply to recognize this voluntary action.
9. The Partnership's commitment to dedicate a portion of the property has not affected, in any way, the activities that would otherwise be required to be carried out by the Partnership to obtain the XXXXXXXXXX authorization, and you advise that there is no other economic benefit associated with the commitment.
10. The Charity is a "charitable organization" within the meaning of subsection 149.1(1) and is qualified to receive ecological gifts. It is located at XXXXXXXXXX and its charitable registration number is XXXXXXXXXX .
Proposed Transaction
11. The Partnership will donate XXXXXXXXXX hectares of ecologically sensitive lands (the "Land") to the Charity.
Purpose of the Proposed Transaction
12. The purpose of the proposed donation is to ensure the long-term protection of the Land.
Ruling Given
Provided that:
i) the preceding statements constitute a complete and accurate disclosure of all the relevant facts, the proposed transaction, and the purpose of the proposed transaction,
ii) the two certificates referred to in paragraph 110.1(1)(d) are filed with the Minister as required by paragraph 110.1(2)(c), and
iii) no consideration or benefit is provided in connection with the transfer of the Land to the Charity,
we confirm that the transfer of the Land to the Charity will, pursuant to subsection 110.1(4), constitute a gift described in paragraph 110.1(1)(d) made by A Co and B Co.
The above ruling is given subject to the limitations and qualifications set forth in Information Circular 70-6R5 dated May 17, 2002 and is binding on the CRA provided that the proposed transaction is completed before XXXXXXXXXX .
Opinion
Provided that the preceding statements constitute a complete and accurate disclosure of all the relevant facts, the proposed transaction and the purpose of the proposed transaction, it is our opinion that in determining the eligible amount of the gift under proposed subsection 248(31), the inclusion of the clause in Paragraph 39 of the authorization that recognizes the commitment of the Partnership to dedicate the land to the Charity will not result in the amount of an advantage within the meaning of proposed subsection 248(32).
Comments
Nothing in this letter should be construed as implying that the CRA has confirmed, reviewed or has made any determination in respect of:
a) whether the land qualifies as ecologically sensitive land for purposes of paragraph 110.1(1)(d);
b) whether the land constitutes inventory or capital property of the Partnership; or
c) any tax consequences relating to the facts and the proposed transaction described herein other than those described in the ruling given above.
Yours truly,
XXXXXXXXXX
Manager
Charitable and Financial Institution Sectors
Financial Sector and Exempt Entities Division
Income Tax Rulings Directorate
Legislative Policy and Regulatory Affairs Branch