19(1)
902815
L. Holloway
(613) 957-2104November 26, 1990
19(1)
Re: Gifts of Residual Interest to a Charity
This is in response to your letter dated September 26, 1990, requesting information concerning the possibility of making a residual interest donation to a Charitable Organization.
The Department's administrative position with respect to gifts of residual interests made to charitable organizations is found in Interpretation Bulletin IT-226 (copy enclosed). Essentially, a "gift", eligible for tax credit treatment, is considered to have been made:
i) in circumstances where the gift vests at the time of the giving of the gift, and
ii) where the value of the residual interest is reasonably ascertainable.
The Department interprets vesting, in the context of IT-226 , to have occurred when a person obtains a right to absolute ownership of a property so that this right cannot be defeated by any future event, even though that person may not be entitled to the immediate enjoyment of all benefits from that right. Therefore, as long as all ownership interests vest with the charity on the date the property is transferred, a gift will be considered made for tax purposes.
The method to be used in valuing the residual interest for purposes of determining the amount of the donation is explained in paragraph 3 of IT-226 . In the example you provided, the present value of the gift would have to be determined. The present value of a $10,000 bond not due to year 2020 would in our view be considerably less than $10,000.
We did not perform any calculations for you as these depend on joint survivor life expectancies, current interest rates, and, as indicated, a present value determination. These types of calculations would be best performed by your accountant or the charity with which you would like to make this arrangement.
We trust these comments will be of assistance.
Yours truly,
for Director Business and General Division Rulings Directorate Legislative and Intergovernmental Affairs Branch
cc. Charities Division