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.
Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the Department.
Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle du ministère.
Principal Issues:
Whether, where sports tickets that have been purchased for client promotion are subsequently gifted to a charity, the corporate donor can deduct the full cost of the tickets, as opposed to only 50% of the cost.
Position:
Amount of deduction would be equal to 50% of the cost of the tickets.
Reasons:
Subsection 67.1(1) of the Act applies for all purposes of the Act, other than sections 62, 63 and 118.2 of the Act, based on the nature of the expenditure and not on its purpose.
5-961671
XXXXXXXXXX C. Chouinard
Attention: XXXXXXXXXX
June 13, 1996
Dear Sir:
Re: Donation of Sports Tickets to Registered Charities
This is in reply to your letter of May 8, 1996, wherein you requested our comments regarding the tax consequences of donating sports tickets to registered charities.
In the situation you describe, a corporation has purchased sports tickets for client promotion purposes and claimed a deduction in respect of 50% of the cost of the tickets, as provided by subsection 67.1(1) of the Income Tax Act (the "Act"). As the corporation is unable to use the tickets for the intended purposes, it plans to gift the tickets to a registered charity, in order that benefactors of the charity may make use of the tickets.
You inquire whether the corporation would be entitled to claim a charitable deduction equal to the full fair market value of the tickets, or whether it would be limited to a deduction equal to 50% of the cost of the tickets.
Subsection 67.1(1) of the Act applies for all purposes of the Act, other than sections 62, 63 and 118.2 of the Act, based on the nature of the expenditure and not on its purpose. Therefore, where property described in subsection 67.1(1) is purchased by a taxpayer and subsequently donated to a charity, the deduction claimed in respect of that property would be subject to the rules of subsection 67.1(1) of the Act. However, the amount that is deemed to be received by the donor, as well as the amount of the donation, would not be subject to the rules of subsection 67.1(1) of the Act, as those amounts are determined with reference to the fair market value of the property donated, as opposed to the cost of the property as determined under subsection 67.1(1) of the Act.
As indicated in paragraph 4 of Interpretation Bulletin IT-297R2, when anything is disposed of to any person by way of a gift inter vivos, the taxpayer (donor) is deemed to have received proceeds of disposition equal to the fair market value of the property pursuant to subparagraph 69(1)(b)(ii) of the Act. Therefore, in the situation you describe, in our view, the corporation would be deemed to have received an amount equal to the fair market value of the tickets, which, if the deduction in respect of the costs of the tickets is claimed in the same taxation year, would result in an income inclusion equal to 50% of the cost of the tickets. In addition, as further stated in paragraph 4 of IT-297R2, the fair market value of the tickets would also be the relevant amount for the purpose of calculating the deductible gift under subsection 110.1(1) of the Act.
As you have indicated that the tickets will be offered to benefactors of the charity, we refer you to paragraph 3 of Interpretation Bulletin IT-110R2 which states that, to qualify as a gift, a donation must be an outright gift and the transaction may not result directly or indirectly in a right, privilege, material benefit or advantage to the donor. The facts of a particular situation would have to be considered in order to determine whether consideration has been received for a gift.
We also would like to bring to your attention the comments in paragraph 3 of Interpretation Bulletin IT-417R which states that the Act requires that all costs that clearly relate to future periods be expensed in those periods, if they are material and if failure to defer the expense would distort the net profit not only of the year during which the expense was incurred but also of the subsequent year or years to which the benefit relates.
We trust that these comments will be of assistance.
Yours truly,
R. Albert
for Director
Business and Publications Division
Income Tax Rulings and Interpretations Directorate
Policy and Legislation Branch
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