An individual has a large taxable capital gain that is split income. Can a donation of the sales proceeds generate a credit that reduces the tax on split income? CRA responded:
Subsection 120.4(3) of the Act ensures that the Part I tax payable by a specified individual is not less than the individual's split income for the year multiplied by the highest individual tax rate for the year reduced only by the dividend tax credit (section 121 of the Act) and the foreign tax credit (section 126 of the Act) available in respect of amounts included in that split income and the disability tax credit (section 118.3 of the Act). Therefore, the charitable donation tax credit (section 118.1 of the Act) cannot be applied to reduce a specified individual’s Part I tax payable that arises as a result of the application of the tax on split income.