| 19(1) | HBW 4172-4-7 |
| B. Fioravanti | |
| (613) 957-2073 |
February 22, 1990
Dear 19(1)
We are writing in reply to your letter of January 16, concerning the deductibility of non-gratuitous payments to the Province.
In this context "non-gratuitous" means that the Province of Ontario would be obliged to use the money in specific ways, stipulated by the donor, such that the Province would not have an unfettered right to deal with the money received.
Specifically, the "non-gratuitous" cash donations would be used for
a) payments of scholarships, awards, etc.,
or
b) deposits to an interest bearing account, under trusteeship of the Treasury of the Province, the income from which would be used for payments similar to those described in (a) above.
Generally, such non-gratuitous payments do not in our view qualify as gifts for the purposes of paragraph 110.1(1)(b) of the Income Tax Act nor the definition of "total Crown gifts" in subsection 118.1(1) of the Act. Support for this view is found in paragraph 1 of Interpretation Bulletin IT-297R which provides that:
"A gift may be defined as a voluntary and gratuitous transfer of real or personal property. There must be a donor who gratuitously disposes of the property and there must be a donee who receives the property given. No right, privilege, material benefit or advantage may accrue to the donor or to a person designated by the donor".
Since the donor, in these situations, directs the use of the cash donation such that the Province does not have an unfettered right to use the money, or income derived from the investment of such money, the donation fails to meet the basic definition of gift as described above.
In situation where gifts are made to Registered Charities for charitable purposes and the gifts are designated for specific use by the donor, such gifts have been acceptable as donations by the Department provided that no benefit accrues to the donor and the designated gift does not benefit any person not dealing at arm's length with the donor.
The Department has been receptive to cases where a specific Act of a provincial legislature has established a corporation that is, in fact and law, an agent of Her Majesty in right of the particular province and which is set up to accept gifts from the public at large for a particular purpose.
In the event that you have a specific corporate structure or vehicle in mind, the Department is prepared to offer an opinion or give a formal advance tax ruling with respect to a specific case.
We trust that the above comments will be of assistance.
Yours sincerely,
C. SavageA/DirectorProvincial and International Relations Division
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