CRA provides comments on split receipting and donations when child benefits

June 24, 2009 | By: .(JavaScript must be enabled to view this email address) Mark Blumberg
Topics: Canadian Charity Law

The CRA recently discussed when a charity that provides affordable housing for people with intellectual disabilities is to receive a donation from a parent then “Can a charitable tax receipt be issued when parents make a donation to the charity to ensure accommodation for their child?”

DOCNUM 2008-0271951E5
AUTHOR Bernards, Sebastian
REFDATE 090610
SUBJECT Charitable Donation Receipts - Split-receipting
SECTION ITA: 118.1; 248(30); 248(31); 248(32)
SECTION 248(35), 248(37)

Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the CRA.
Prenez note que ce document, bien qu’exact au moment émis, peut ne pas représenter la position actuelle de l’ARC.

PRINCIPAL ISSUES: A charity operates to provide affordable housing for people with intellectual disabilities.  Can a charitable tax receipt be issued when parents make a donation to the charity to ensure accommodation for their child?
POSITION: Provided general comments on the application of the draft gifting legislation.
REASONS: Under the proposed split-receipting rules, the eligible amount of a gift is the excess of the fair market value of the property transferred to a qualified donee over the amount of the advantage provided to a donor.

XXXXXXXXXX 2008-027195
S. Bernards
June 10, 2009


Re: Charitable Donations

This is in reply to your letter of March 6, 2008 and further to our telephone conversations (Bernards/XXXXXXXXXX and Bernards/XXXXXXXXXX ).  You have asked for our views on whether a donation to a charity in the five scenarios described in your letter qualifies as a charitable gift for income tax purposes. 

In the scenarios described, the charity is a registered charity that operates to provide affordable housing for people with intellectual disabilities.  The scenarios involve a donation by the parents of a child who qualifies for housing under the charity’s program.  Three of the scenarios involve the parents making a lump-sum payment or monthly contributions to the charity.  In the other two scenarios, the parents agree to donate their home to the charity.  In all five scenarios, the charity is to agree to provide the child with a right of occupancy in a housing unit or the donated home in return for the donation.  The child will be responsible for the payment of monthly rent in order to maintain his/her right of occupancy. 

Written confirmation of the tax implications inherent in particular transactions is given by this Directorate only where the transactions are proposed and are the subject matter of an advance income tax ruling request.  For more information about how to obtain a ruling, please refer to Information Circular 70-6R5, Advance Income Tax Rulings, dated May 17, 2002.  This Information Circular and other Canada Revenue Agency (“CRA”) publications can be accessed on the internet at  Where the particular transactions are completed, the inquiry should be addressed to the relevant Tax Services Office.  However, we can offer the following general comments which may be of assistance. 

Our Comments

Section 118.1 of the Income Tax Act (the “Act”) provides that individual taxpayers may claim a credit against taxes payable, within specified limits, for an eligible amount of a gift made to a qualified donee (which includes a registered charity), if supported by an official receipt. 

The term “gift” is not defined in the Act and therefore assumes its common law meaning.  Under common law, a bona fide gift is a voluntary transfer of property from a donor, who must freely dispose of his or her property, to a donee, who receives the property given with no right, privilege, material benefit or advantage conferred on the donor or any person designated by the donor in exchange for the donor making the gift. 

Proposed amendments to the Act will allow a transfer of property to qualify as a gift, for tax purposes, in certain circumstances where a donor has received consideration for property transferred to a qualified donee after December 20, 2002. 

Subject to the application of proposed subsection 248(35) of the Act, the eligible amount of a gift as determined under proposed subsection 248(31) of the Act is the amount by which the fair market value (“FMV”) of the property that is the subject of the gift exceeds the amount of the advantage, if any, in respect of the gift.  Where proposed subsection 248(35) of the Act applies, the FMV of a property that is the subject of a gift is deemed, for the purposes of determining the eligible amount of a gift, to be the lesser of the FMV of the property and the cost, or in the case of capital property, the adjusted cost base of the property to the donor.  Proposed subsection 248(37) of the Act provides exceptions to the application of proposed subsection 248(35) of the Act, including a gift of real property situated in Canada. 

The amount of the advantage under proposed subsection 248(32) of the Act is generally the FMV, at the time the gift is made, of any property, service, compensation or other benefit received, or expected to be received in the future, by the donor, or a person who does not deal at arm’s length with the donor, as consideration for, or in gratitude for the gift.  Note that if the value of the advantage exceeds 80% of the FMV of the transferred property, there will not be an eligible amount of a gift unless the transferor of the property establishes to the satisfaction of the Minister of National Revenue that the transfer was made with the intention to make a gift. 

With regard to the scenarios described, it would seem that the primary purpose of the donations in all five scenarios is to ensure accommodation for the child.  For a transfer of property to qualify as a gift, one of the requirements is that there must be donative intent.  Even if donative intent can be established, the eligible amount of the gift is reduced by the value of the advantage provided to the parents which would include the securing of accommodation for the child as well as the assumption by the charity of any outstanding mortgage on the donated home.

It is the responsibility of the charity to determine the value of the advantage provided.  In our view, it may be difficult to substantiate the value of securing accommodation for the child, particularly if the child would not otherwise be provided with such accommodation if it were not for the donation by the parents.  As indicated in the CRA’s guidelines on split-receipting contained in Income Tax Technical News (ITTN) No. 26, if the value of an advantage cannot be reasonably ascertained, no charitable tax deduction or credit will be allowed.  In this regard, the charity will be required to identify the advantage and the amount thereof on any receipt provided to the donor in accordance with the proposed amendments to section 3501 of the Income Tax Regulations.  We note that there is a discussion on the donation of a property subject to a mortgage in ITTN No. 26. 

While we hope that our comments will be of assistance to you, they are given in accordance with the practice referred to in paragraph 22 of IC 70-6R5 and are not binding on the CRA in respect of any particular situation.

Yours truly,

Jenie Leigh
For Director
Ontario Corporate Tax Division
Income Tax Rulings Directorate
Legislative Policy and Regulatory Affairs Branch


Mark Blumberg is a lawyer at Blumberg Segal LLP in Toronto, Ontario.  He can be contacted at or at 416-361-1982. To find out more about legal services that Blumbergs provides to Canadian charities and non-profits please visit or

This article is for information purposes only. It is not intended to be legal advice. You should not act or abstain from acting based upon such information without first consulting a legal professional.

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Charity Lawyer Mark Blumberg

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.
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