| 19(1) | File No. 5-9167 |
| R.B. Day | |
| (613) 957-2136 |
January 26, 1990
Dear 19(1)
We are writing in reply to your letter of November 8, 1989, wherein you requested some guidance regarding the income tax implications for a corporate donor, with respect to a gift of a 24(1)
Our understanding of the situation described in your letter and clarified during our telephone conversation of January 8, 1990, is as follows.
24(1)
Our Comments
In situations where the donor acquires property, and shortly thereafter, disposition could be consider to be an adventure in the nature of trade and could be included in the donor's income. Paragraph 69(1)(b) of the Income Tax Act deems the donor of a gift to have received fair market value as proceeds of disposition.
In the situation described in your letter, where the fair market value of the Collection will be paid to the individual and will be reflected in the official receipt to be issued by your Government, it would appear that the issuance of a donation receipt, pursuant to paragraph 110.1(1)(B) would offset an amount to be brought into the corporation's income as proceeds of disposition of the Collection by way of gift. The corporation's cost of acquiring the Collection would be deductible in computing its income under section 9. For example, if the value of the Collection was $100, the corporation would have proceeds of $100, less the amount paid to the individual of $100, for a profit of nil. There would be a gift to the Crown of $100. The taxable income of the corporation would be $100 less than it would otherwise have been, which reflects the amount be which the corporation is actually out of pocket.
We are enclosing, for your information, copies of the following Interpretation Bulletins regarding the income tax implications of Charitable Donations
IT-110R2 - Deductible Gifts and Official Donation receipts.
IT-288R - Gifts of Capital Properties to a Charity and Others
IT-297R - Gifts in Kind to Charity and Others.
IT-407R2 - Disposition of Canadian Cultural Property.
We hope these comments are of assistance.
Yours truly,
for DirectorBusiness and General DivisionSpecialty Rulings DirectorateLegislative and Intergovernmental Affairs Branch