CRA confirmed that where an individual has by will made a gift to a qualified donee of the capital interest in a charitable remainder trust (“CRT”), such capital interest is not considered for purposes of s. 118.1(5.1) to have been acquired by the graduated rate estate (“GRE”) on or as a consequence of the individual's death, so that s. 118.1(5.1) is unavailable to permit a donation credit to be claimed in the T1 return of the deceased for the year of death or the preceding year, and so that it is only the GRE which will be able to claim such credit for the taxation year in which the gift is in fact made or for any of the five subsequent taxation years pursuant to s. 118.1(1)(c)(ii)(A).
Regarding the timing of the gift by the GRE, CRA stated:
By virtue of paragraph 118.1(5)(b), a gift by will is deemed to have been made at the time the property that is the subject of the gift is transferred to the donee and not at any other time. … IT-226R states … that a gift of a capital interest in a trust is made when the transfer of the property to the trust has been completed and the equitable interest in the trust has vested in the qualified done … [which occurs] where, among other conditions, the size of the qualified donee's interest can be ascertained and it is clear that the qualified donee will eventually receive full ownership of the transferred property.
Consequently, the GRE could be considered to have made a gift of the capital interest in the CRT to the qualified donee at the time the CRT is created by GRE and the capital interest vests in the qualified donee, provided that all of the conditions set out in paragraph 2 of IT-226R are satisfied.