CRA recently released a letter which discusses whether an employee will realize a taxable benefit if the employee opts to forego a non-cash gift valued over $500 that he or she is otherwise entitled to and directs the employer to make a cash gift of a specified amount to a specified registered charity.
CRA had the following comments:
"Subsection 56(2) of Act requires an amount or benefit not received or enjoyed by a taxpayer to be included in his or her income if all of the following conditions are met:
* there is a payment or transfer of property to a person other than the taxpayer;
* the payment or transfer of property is made pursuant to the direction or with the concurrence of the taxpayer;
* the payment or transfer of property is for the benefit of the taxpayer or for the benefit of another person whom the taxpayer desired to benefit; and
* the payment or transfer of property would have been included in the taxpayer’s income if it had been received by the taxpayer.
Generally, we are of the view that where a taxpayer directs that an amount to be received from an office or employment be paid directly to a charity, subsection 56(2) of the Act will apply to include that amount in the income of that taxpayer to the extent that it would have been if it were received by the taxpayer. The concurrence or participation of the taxpayer in the conferring of the benefit to a third party may be passive or implicit and can be inferred from all the circumstances of a particular situation. This provision is discussed in detail in Interpretation Bulletin IT-335R2 - Indirect Payments, dated July 12, 2004, which is available on the CRA website."
CRA concluded that the first $500 of a non-cash long-service award would have been non-taxable if it were received by the employee so only the amount of the donation that exceeds $500 would be required to be included in the employee's income.
To read the full CRA letter, please click here.
Do you require legal advice with respect to Canadian or Ontario non-profits or charities?
Mark Blumberg is a partner at the law firm of Blumberg Segal LLP in Toronto and works almost exclusively in the areas of non-profit and charity law.