We hear a selected few rich people or a poor teacher gifting various items during their life time. We have read these news items several times. Canada, the land of new enterprise with myriad opening for growth also expects its citizens, permanent residents, or anyone visiting to view its most beautiful natural resources to donate liberally. Everywhere you visit there, a request for gift for any worthy cause is never left to imagination. Blatantly, you are requested to gift for a worthy cause. High level of systematic instructions makes the gift making a pleasure.

Here is its relevant website for knowledge.

https://www.canada.ca/content/dam/cra-arc/formspubs/pub/p113/p113-21e.pdf

Let us learn the significance of the instructions.

Let me introduce you to the meaning of the word gift from The Oxford Thesaurus as under:

“Offering, grant, largesse, benevolence, dole etc.”

Or in simple terms, a giving of something to someone, some entity, or an institution.

In most situations, voluntary transfer of property without any valuable consideration.

Page 6 may try to explain a lot much better.

“If you made a gift of money or other property to a qualified donee (see “Gifts to registered charities and other qualified donees” on page 7), you may be able to claim federal and provincial or territorial non-refundable tax credits when you file your income tax and benefit return, provided that you receive an official donation receipt from the qualified donee. If you lived in Quebec on December 31, claim your provincial tax credit on your Quebec income tax return.”

What gifts can you claim?

“Gifts to registered charities and other qualified donees” gets mention of 11 donees of which particular mention may be made as under:

Registered  charities, journalism organizations (RJO), Canadian amateur athletic associations, national arts service organizations, housing corporations resident in Canada set up only to provide low-cost housing for the aged, municipalities in Canada, municipal or public bodies performing a function of government in Canada, the United Nations and its agencies ,Her Majesty in Right of Canada, a province, or a territory, universities outside Canada, the student body of which ordinarily includes students from Canada, that are registered with the CRA, and registered foreign charities to which Her Majesty in Right of Canada has made a gift.

Some more basic information of gifts from page 7 of the guidelines under discussion. This is important to know this before we learn elaborate information on gifts.

Yes, from page 7.

“It is the eligible amount of the gift (as defined on page 5) that is used to calculate your non-refundable donation tax credits. The tax consequences of a gift depend on such facts as whether it is:

  • a gift to a qualified donee (as defined below) ԏ a gift of ecologically sensitive land
  • a gift of certified cultural property to a designated institution or a public authority under the Cultural Property Export and Import Act
  • a gift of a share, debt obligation or right listed on a designated stock exchange, a share of the capital stock of a mutual fund corporation, a unit of a mutual fund trust, an interest in a related segregated fund trust, or a prescribed debt obligation ԏ a gift of publicly listed flow-through shares acquired after March 21, 2011
  • a gift of non-qualifying securities
  • a gift of options to acquire property It will also depend on whether the property was capital property, listed personal property, or inventory of a business.”

If I want to know whether the art gallery to whom I want to donate is authorized to receive the gift so that I may get legal tax credits.

Yes, you can get the required assistance.

Qualified donees must appear on the publicly available lists that the CRA maintains. Go to canada.ca/charities-giving and click on “List of charities and other qualified donees” to access these lists.

Having taken up to learn the basics of gift which is not unusual for Indian kings/Agarwal/Chettiar of South India with thousands of Dharamsalas, Ashrams and other social work, let us hear accounting terms related to  gifts.

For a gift of property made to a qualified donee, the fair market value (FMV) of the property gifted is deemed to be whichever of the following amounts is less: ԏ FMV otherwise determined cost (ACB if it is capital property or adjusted cost basis if it is a life insurance policy) to the donor immediately before the gift was made. Determination of fare market value through valuers, appraisal experts, or art valuers with vast experience over fraudulent ones is dealt with separately in this article.

What is the eligible amount of claim that can be treated as gifts?

Generally, one can claim part or all of the eligible amount of the gifts, up to the limit of 75% of taxpayer’s net income for the year.

One can easily increase this limit by opting for gifts like capital property.

What happens to capital gains realized on gifts of certain capital property?

You may not include the capital gains as your income if you have donated certain types of capital property to qualified done.

Yes, you are entitled to an inclusion rate of zero on any capital gain realized on such gifts. Which are the properties that attract inclusion rate of zero on capital gains?

The inclusion rate of zero applies if you donate any of the following property:

– a share of the capital stock of a mutual fund corporation

– a unit of a mutual fund trust

– an interest in a related segregated fund trust

– a prescribed debt obligation

– a share, debt obligation, or right listed on a designated stock exchange.

Various other items with detailed guidelines available on page 23 of the annexure under reference.

I would like to know what are the listed personal property?

Personal-use property includes a special class of property called listed personal property.

 Items in this class usually increase in value.

 Listed personal properties include: ԏ prints, etchings, drawings, paintings, sculptures, or other similar works of art ԏ jewelry ԏ rare folios, rare manuscripts, or rare books ԏ stamps ԏ coins.

Yes, special rules do exist for donation of personal property and guidance through Guide T4037,

Let us look at some practical situations.

I want to donate a cultural property, say, anything from books, sculptures, manuscripts etc. Can I declare them as cultural property or not?

Your certification does not merit anything. You may have to contact, you need to contact the CCPERB, to get it certified under the CPEIA. (Cultural Property Export and Import Act – (CPEIA)).

The Canadian Cultural Property Export Review Board is (CCPERB).

Gifts of capital property that is depreciable property – actual calculation

Class No. of property —–

Amount of recaptured depreciation included on your current-year return $

1
Net proceeds of disposition of the current year donated property for this class $ A
Capital cost of the current year donated property for this class $ B
Enter the amount from line A or line B, whichever is less. $ 2*
Enter the amount from line 1 or line 2 whichever is less. $ 3
Enter this amount on line 33700 of Schedule 9.

If you included on your 2021 income tax and benefit return recaptured depreciation from more than one class, complete a separate Chart 2 for each class, add the results, and enter the total on line 33700 of Schedule 9.

* If you donated more than one property in this class in the year, complete lines A and B for each property and enter the total on line 2.

What if you need some help on gifts to charities?

The instructions are as under:

If you need more information about charitable tax receipts after reading this article or have taken action to donate, go to canada.ca/charities-giving for details.

To verify if a charity is registered under the Income Tax Act, and to access its information returns, please consult the List of charities by going to canada.ca/charities-list.

Canada Gifts and income tax

How do I deal with a situation wherein I am an artist and want to donate one of my best painting to a known charity duly approved?

Let me explain from registered instructions from guidelines.

As an artist, if you donate a gift from your inventory and the gift’s fair market value (FMV) is more than its cost amount, you can designate any amount for the value of the donated property as long as it meets the following conditions:

  • the amount is not greater than the FMV
  • the amount is not less than the greater of the two following amounts:

 – the amount of any advantage in respect of the gift

 – the cost amounts

Use the amount you choose for the value of the gift as proceeds of disposition to determine your income. This amount will also be used to calculate the eligible amount of the gift, which you need to calculate the tax credit. You may refer caption “Capital gains and losses” on page 22 of the publication under discussion.

Some more facts gathered

Can I carry forward the gifts that I made this year but do not want to claim any tax credits?

The tax credits for gifts made may be claimed up to next 5 years in your tax return.

Can I myself value the properties that I am donating or other art objects?

Instructions on page 14 under the head “appraisals” lead one to understand that appraisers duly approved by the government or other regulatory bodies are to be consulted to assess the fare market value(FMV) which will be used to arrive at the tax credit that will help the tax return for benefits.

Gifts in the year of death

The tax credit may be claimed on the disease d’s final tax return on the basis of the eligible amount of gifts that were made by the diseased person in the year of death.

However, the amount claimed is limited as under to the lowest amount:

  • 100% of the deceased person’s net income, or
  • the eligible amount of the gift(s) made in the year of death, plus the unclaimed portion of the eligible amount of any gifts made in the 5 years before the year of death.

If at all you need any guidance on gift in Canada, the following help lines are for you only.

Tax Information Phone Service (TIPS) For tax information by telephone, use our automated service, TIPS, by calling 1-800-267-6999.

The following digital service as prescribed from their website for careful assimilation and follow-up.

From page 27 and 28 of the guidelines for information. Reference again given about the website at end.

Guided narration is simply very clear and helps to arrive at results.

“My Account

My Account lets you view your personal income tax and benefit information and manage your tax affairs online.

Find out how to register at canada.ca/my -cra-account. MyCRA mobile web app

The MyCRA mobile web app lets you access and view key portions of your tax information.

Access the app at canada.ca/cra-mobile-apps.

Use My Account or MyCRA to: ԏ view your benefit and credit information

  • view your notice of assessment ԏ change your address, direct deposit information, marital status, and information about children in your care.
  • register to receive email notifications when you have mail to view in My Account and when important changes are made to your account
  • check your TFSA contribution room and RRSP deduction limit ԏ check the status of your tax return.”
  • make a payment to the CRA online with My Payment or a pre-authorized debit (PAD) agreement, or create a QR code to pay in person at Canada Post.

Page 28 gives more guidance, if you need.

Conclusion

With lacs of Indians living in Canada as permanent residents or as citizen and thousands like you or me visiting as tourists, Canada upgrades itself as the most progressive, and multi diversified community living at the best. It is one day just possible that your grand kids would force you to visit them in Canada, attend their school/college functions where the grand parents are honored first as cultural emblem, and you are feeling to donate something in return. Yes, your kids would neither say do it nor allow you to do it. But a good knowledge by reading an article like this emplanes you to land of wisdom, and forces you to act with confidence. You will gift fully knowing the procedure, and satisfaction of gifting someone who deserves it.

Yes, with proper reading of this article, any one can gift, and feel happy about it legally. Your grandkids will naturally admire your philanthropy. So, read this article several times, refer to the source many times, and please do gift to make your living a pleasant one.

Reference

https://www.canada.ca/content/dam/cra-arc/formspubs/pub/p113/p113-21e.pdf

Disclaimer: The contents of this article are for information purposes only and do not constitute an advice or a legal opinion and are personal views of the author. It is based upon relevant law and/or facts available at that point of time and prepared with due accuracy & reliability. Readers are requested to check and refer relevant provisions of statute, latest judicial pronouncements, circulars, clarifications etc. before acting because of the above write up. The possibility of other views on the subject matter cannot be ruled out. By use of the said information, you agree that Author/Tax Guru is not responsible or liable in any manner for the authenticity, accuracy, completeness, errors, or any kind of omissions in this piece of information for any action taken thereof. This is not any kind of advertisement or solicitation of work by a professional

Author Bio

Qualification: Post Graduate
Company: subramanian natarajan cpa firm
Location: NEW DELHI, Delhi, India
Member Since: 09 May 2017 | Total Posts: 236
A banker with 27 years of experience, a CPA from USA with specialization in US taxation, individual, partnership, S corporation or LLC taxation etc View Full Profile

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