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: Whether a transfer of proceeds to a registered charity is a gift by an individual


REASONS: The transfer is made by a third party.

XXXXXXXXXX 2009-031403

Sylvie Danis

(613) 957-3496

May 25, 2009


Re: Fundraising Strategy

This is in response to your e-mail of March 13, 2009, wherein you requested our comments on whether an amount transferred to a charity can be considered a gift by an individual for the purposes of the donation tax credit under subsection 118.1(3) of the Income Tax Act (“the Act”) in a situation where an individual posts information on a website operated by a taxpayer, such information is purchased by a third party for a fee, and the proceeds net of the taxpayer’s commission are sent to a registered charity of the individual’s choice. In this scenario, the taxpayer sets the sales price and the amount to be transferred to the charity .

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 submitted in the manner set out in Information Circular 70-6R5, Advance income Tax Rulings, dated May 17, 2002. Where the particular transactions are completed, the inquiry should be addressed to the relevant Tax Services Office.

Section 118.1 of 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. A charitable gift must be made out of affection, respect, charity or like impulses, and not from the constraining forces of any moral obligation or legal duty.

Proposed subsections 248(30) to (32) of the Act allow for the recognition of a gift for tax purposes in certain situations where there is expectation by the donor that in return for the contribution, a benefit of any kind will be provided to the donor or a person designated by the donor. However, pursuant to proposed subsection 248(31) of the Act, 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.

In the situation presented to us, it is our understanding that the individual posting the information on the website will not be entitled to receive any proceeds from the sale of the information. It is our view that if the individual has no legal entitlement or right to receive proceeds from the sale, then it is not possible for the individual to voluntarily choose to transfer proceeds to a charity and as such, a gift has not been made by the individual for purposes of subsection 118.1(3) of the Income Tax Act.

We trust the above comments are of assistance. However, as stated in paragraph 22 of Information Circular 70-6R4, the above comments do not constitute an income tax ruling and accordingly are not binding on the Canada Revenue Agency in respect of any particular situation.

Yours truly,

F. Lee Workman

Charitable and Financial Institutions Sectors
Financial Sector and Exempt Entities Division
Income Tax Rulings Directorate
Legislative Policy and Regulatory Affairs Branch