ARCHIVED – Technical Amendments

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Recovering Tax Assistance for Returned Property

1. What are the new rules regarding recovering tax assistance for returned property?
2. How should a replacement receipt be filed?
3. Are the Income Tax Act provisions regarding the funding of non-qualified donees by registered charities affected by these proposals?
4. When will these new rules apply?
5. Where will I find more information on the proposed measures?

Non-Qualifying Securities

1. What is a non-qualifying security (NQS)?
2. What are the current rules regarding donations of an NQS?
3. How have the rules regarding the donation of an NQS changed?
4. When will these new rules apply?
5. Where will I find more information on the proposed measures?

Granting of Options to Qualified Donees

1. What has changed with regard to issuing donations receipts for the granting of an option to a qualified donee?
2. When will these new rules apply?
3. Where will I find more information on the proposed measures?

Donations of Publicly Listed Flow-Through Shares

1. What are the new rules regarding gifts of flow-through shares to qualified donees?
2. When will these new rules apply?
3. Where will I find more information on the proposed measures?

Recovering Tax Assistance for Returned Property

1. What are the new rules regarding recovering tax assistance for returned property?

Budget 2011 proposes that qualified donees who have returned donated property that is, either the same property, identical property or a substitute for the property donated, will be required to provide a copy of the replacement receipt to the CRA where the difference between the amount on the original receipt and the replacement receipt is greater than $50. In addition, where such property has been returned, the new rules will permit reassessments to disallow a taxpayer's claim for a charitable donations tax credit or deduction related to the returned property and in some circumstances other consequential adjustments will be made.

2. How should a replacement receipt be filed?

Qualified donees should file the replacement receipt with the Audit Section, Compliance Division of CRA's Charities Directorate.

3. Are the Income Tax Act provisions regarding the funding of non-qualified donees by registered charities affected by these proposals?

The provisions regarding the funding of non-qualified donees are not affected by these proposals. The new rules merely extend the period within which the CRA may go back and reassess where a receipt has been issued and tax credits or deductions have been claimed for donated property that was subsequently returned.

Registered charities that return donated property may still be found to have made a gift to a non-qualified donee, in contravention of the Income Tax Act. In this regard, we would also note that registered charities are subject to provincial and federal legislation, as well as common law, and in particular the law of trusts, all of which may affect their ability to legally return property.

4. When will these new rules apply?

The rules apply to property that has been returned after March 21, 2011.

5. 5. Where will I find more information on the proposed measures?

As further information is developed, it will be added to the Charities and Giving Web pages.

Non-Qualifying Securities

1. What is a non-qualifying security (NQS)?

A non-qualifying security is a share in a corporation that the donor does not deal with at arm's length and whose shares are not listed on a prescribed stock exchange (e.g., a share in a privately held company) or a debt obligation (e.g., a promissory note) issued by a company or person that is not at arm's length to the donor.

Go to CSP-N05, Summary Policy for more information on NQS.

2. What are the current rules regarding donations of an NQS?

Currently a qualified donee can only issue an official donation receipt to the donor of a non-qualifying security if the security is an excepted gift, or if within five years of acquiring the non-qualifying security:

• the qualified donee disposes of the non-qualifying security; or
• the security ceases to be a non-qualifying security (i.e., a privately held company goes public and its shares become listed on a prescribed stock exchange).

A non-qualifying security is considered to be an excepted gift if it meets all of the following criteria:

• it is in the form of a share;
• the qualified donee that receives the non-qualifying security is not a private foundation;
• the donor is at arm's length to the qualified donee; and
• the donor is at arm's length to each of the charitable organization's or public foundation's directors/trustees.

3. How have the rules regarding the donation of an NQS changed?

Budget 2011 proposes an anti-avoidance rule to ensure that the NQS rules are not circumvented by requiring that, where a qualified donee has received a gift of an NQS, no receipt may be issued unless and until the NQS has been disposed of in exchange for property that is not another NQS of any party.

4. When will these new rules apply?

The rules apply to dispositions of an NQS after March 21, 2011.

5. Where will I find more information on the proposed measures?

As further information is developed, it will be added to the Charities and Giving Web pages.

Granting of Options to Qualified Donees

1. What has changed with regard to issuing donations receipts for the granting of an option to a qualified donee?

The application of the rules in the Income Tax Act was unclear in the case of the granting of an option to a qualified donee. Under the new rules, the Act provides that no official donation receipt may be issued until such time as the qualified donee receives value for the option (e.g., exercises or sells the option).

2. When will these new rules apply?

The rules apply to options granted to qualified donees after March 21, 2011.

3. Where will I find more information on the proposed measures?

As further information is developed, it will be added to the Charities and Giving Web pages.

Donations of Publicly Listed Flow-Through Shares

1. What are the new rules regarding gifts of flow-through shares to qualified donees?

Currently when a person acquires and then gifts publicly-traded flow-through shares to a qualified donee, substantial tax benefits are available to the donor in addition to the charitable donations tax credit, or where the donor is a corporation, the deduction. These include the Mineral Exploration Tax Credit (METC), eligible exploration, development and project start-up expenses renounced to the taxpayer, and a taxable capital gain on the disposition of shares equal to zero. Where a gift of cash would normally result in a tax savings of a maximum of 46% of the amount gifted, a gift of flow-through shares could potentially result in tax-savings of more than 90%.

Budget 2011 proposes to amend the Income Tax Act where a share, or a right to acquire a share, of a particular class of the capital stock of a corporation (referred to as a flow-through share) is issued to a taxpayer under a flow-through share agreement entered into after March 21, 2011. In such a case, the exemption from capital gains tax on donations of publicly listed securities available in respect of subsequent donations will only remain to the extent that the capital gain exceeds the threshold amount. The threshold amount is generally the amount paid by the donor to acquire the security under the arrangement

2. When will these new rules apply?

The rules apply to dispositions after March 21, 2011, when there have been acquisitions after March 21, 2011.

3. Where will I find more information on the proposed measures?

As further information is developed, it will be added to the Charities and Giving Web pages.

Date modified:

2015-07-15