Following the death of the deceased in 2016, the executors of his estate (a graduated rate estate) sell mutual fund units (whose adjusted cost base had been stepped-up under s. 70(5)) in order to make a charitable donation in their discretion. Could the donation of the cash (viewed as substituted property) be deducted in the terminal return pursuant to s. 118.1(5.1) and s. (c)(i)(C) of the definition of “total charitable gifts” in s. 118.1(1)? CRA responded:
[P]ursuant to subsection 248(5), the cash would be property substituted for the property that was acquired by the estate on and as a consequence of the death of the deceased (the mutual fund units acquired by the estate upon the death of the deceased that were subsequently sold and cash realized). Therefore, as subsection 118.1(5.1) would apply to the donation the donation credit can be claimed on the final return of the deceased pursuant to clause (c)(i)(C) of the definition of “total charitable gifts” in subsection 118.1(1).