Principal Issues:
Whether the donation of an airplane ticket that has been acquired by redeeming reward points qualifies as a gift for the purposes of section 118.1 of the Income Tax Act.
Position: Yes
Reasons:
Where the reward points are redeemed to acquire an airplane ticket, the property transferred to the registered charity is the airplane ticket. It is the fair market value of the airplane ticket at the time it is transferred to the charity that is relevant to the determination of the donation tax credit.
XXXXXXXXXX 2006-017325
June 2, 2006
Dear XXXXXXXXXX:
Re: Donation of an Airplane Ticket
We are writing in response to your e-mail dated February 1, 2006 and further to our subsequent telephone conversation (XXXXXXXXXX/Workman). You have requested our views on whether the donation of an airplane ticket that has been acquired by redeeming reward points would qualify as a charitable gift.
Written confirmation of the tax implications inherent in particular transactions is given by this Directorate only where the transactions are proposed and are the subject matter of an Advance Income Tax Ruling request. Where the particular transactions are completed, the inquiry should be addressed to the relevant Tax Services Office. However, we are prepared to provide the following general comments.
A gift for purposes of section 118.1 of the Income Tax Act (the "Act") involves, in addition to other conditions that must be satisfied, a transfer of property to a qualified donee. Where an individual redeems reward points under a program in which the individual is a member to acquire airplane tickets, and then voluntarily transfers the airplane tickets to a registered charity, the individual will be considered to have made a gift of airplane tickets rather than a gift of reward points. For the purposes of section 118.1 of the Act, the gift will be considered to have been made at the time the airplane tickets are transferred to the charity and it is the fair market value of the airplane tickets at that time that is relevant in determining the eligible amount of the gift in computing the donation tax credit. For more information on gifts in kind and the draft split-receipting rules, you may refer to our pamphlet P113, "Gifts and Income Tax," which is available on our website at www.cra-arc.gc.ca/forms.
We trust that these comments are of assistance.
Yours truly,
For/F. Lee Workman
Section Manager
Charitable and Financial Institution Sectors
Financial Sector and Exempt Entities Division
Income Tax Rulings Directorate