| 19(1) | File No. 5-9171 |
| J.D. Jones | |
| (613) 957-2104 |
January 18, 1990
Dear Sirs:
Re: Subsections 118.1(6) and 70(5) of the Income Tax Act (the "Act")
This is in reply to your letter of December 1, 1989, wherein you requested our opinion on the interpretation of subsections 118.1(6) and 70(5) of the Act.
It is our understanding the details of your situation may be summarized as follows. A testator bequeaths a dollar amount legacy to a registered charity, as defined in the Act, and the residue of the testator's property equally to each of certain other registered charities as defined in the Act. The will allows the executors of the testator's estate to distribute capital property of the estate in satisfaction of the gifts to the registered charities. The fair market value of each property which may be distributed to these above-mentioned charities will exceed its adjusted cost base to the testator at the time of the distribution from the estate. The property sought to be distributed does not constitute depreciable property of a prescribed class as defined in the Act.
Based upon the above, you wish to know whether the gifts of capital property made to registered charities, as defined in the Act, are gifts of capital property made "by this will or otherwise" and whether the application of subsection 118.1(6) of the Act will exclude the application of subsection 70(5) of the Act.
It is our view that, in the above situation, the executors of the deceased taxpayer's estate may be able to make use of the provisions of subsection 118.1(6) of the Act on behalf of the deceased taxpayer as the gifts of capital property appear to have been made by the taxpayer's will or otherwise for the purposes of subsection 118.1(6) of the Act. Additionally, it is our view that where executors of the deceased taxpayer's estate make use of the provisions of subsection 118.1(6) of the Act, that the provisions of subsection 70(5) of the Act will not apply to the same capital property.
We trust our comments are of assistance to you.
Yours truly,
for DirectorBusiness and General DivisionSpecialty Rulings DirectorateLegislative and Intergovernmental Affairs Branch