Mr. X and Mrs. X are married under the community of property regime. If Mrs. X survives Mr. X and renounces the community, Mr. X's will would provide that all of the Realty Co shares would be transferred to a testamentary spousal trust pursuant to s. 70(6)(b), with the will providing that upon Mrs. X's death, all the shares would be bequeathed to a registered charity. Mr. X's legal representative would opt pursuant to s. 118.1(6) for the adjusted cost base of the Realty Co shares to be the value of the gift.
Who could claim the donation tax credit for the donation, under Mr. X's will, of the Realty Co shares? CRA responded:
As noted in paragraph 4 of IT-226R, In the case of an equitable interest in a trust, the CRA considers a gift to have been made when the transfer of property …( … the shares of Realty Co) to the trust has been completed and the equitable interest in the trust has vested in the charity … . Thus, while subsection 118.1(5) may apply to deem Mr. X to have made a gift of property (in this case, the property that is the subject of the capital interest) immediately before his death subject to subsection 118.1(13), the provisions of subsection 118.1(5) cannot take effect until the gift is actually completed. A return is filed by the taxpayer's representatives pursuant to paragraph 152(6)(c) to give effect to the deemed disposition immediately before death.