publication date: Sep 17, 2012
author/source: Theresa L.M. Man
anniversary date of the split-receipting rules is drawing near, and yet Parliament
has still not enacted amendments to the Income Tax Act
to make them law.
Since the proposal (and application) of the split-receipting rules on December
20, 2002, questions continue to arise on how these rules are to be applied.
On May 23, 2012, Canada
(CRA) released its views on the application of the split-receipting
rules to a fundraising dinner based on a hypothetical set of facts (document #2010-0391511E5).
In that case, Mrs. A enters into an arrangement with a registered charity to
host a fundraising dinner for the charity. The dinner will be hosted in Mrs.
A's home by acquiring catering services from a third-party contractor. Mrs. A
will also donate a selection of fine wines for consumption by the dinner
participants. Mrs. A has requested a
donation receipt in respect of the wines that she will donate and the catering
cheques or document wish for receipt, not reimbursement
CRA indicated that
generally a charity can reimburse an individual for expenses incurred on behalf
of the charity and later accept the return of the payment as a gift, if the
amount is returned voluntarily. In this particular scenario, CRA expressed that
the host must have a right to be reimbursed under the terms of an agreement
with the charity if the charity is to issue a receipt to the host in lieu of
reimbursing the expenses. For example, if a person paid $200 to hire a caterer,
then the person would be entitled to be reimbursed the $200 paid. After the
reimbursement, if the person voluntarily donates the $200 back to the charity,
then a donation receipt can be issued.
according to CRA's policy CPC-012
it is also possible for the charity to issue a donation receipt in lieu of
reimbursement, provided that the charity obtain a written direction from the
person confirming that right to reimbursement and directing the charity to
issue a receipt rather than provide reimbursement.
Value gifts in
In relation to the
donation of fine wine by Mrs. A, CRA points out that the policy regarding
donation of gifts in kind will need to be followed in order to determine
whether a receipt can be issued and what the eligible amount of the receipt
As well, CRA was
asked to address the following hypothetical facts: (1) individuals may
participate at the event by paying a pre-determined amount to Mrs. A who acts on
behalf of the charity, or (2) individuals may participate at the event by
purchasing the right to participate in the fundraising dinner at an auction held
for the charity's benefit. The question is whether an official donation receipt
could be issued to these individuals.
value of comparable meal
With respect to
the first scenario where participants pay a pre-determined amount to Mrs. A who
acts on behalf of the charity, CRA expressed that the value of a comparable
meal provided by a comparable facility should be considered in determining the
amount of advantage in respect of the gift in order to arrive at the eligible
amount of the gift. For example, if participants paid $200 to attend the event
and it would cost $80 to have a comparable meal, then the eligible amount of
the receipt would be $120 provided no other advantages are involved. A similar
example was provided in CRA's Income Tax - Technical News No. 26, dated December
name value in advance and receipt the difference
In the second
scenario where participants purchase the right to participate in the fundraising
dinner at an auction held for the charity's benefit, CRA expressed that a
receipt can be issued for the difference between the amount bid by the participant
and the value of the right to attend the fundraising dinner sold at the
auction, provided that the value is clearly otherwise ascertainable and made
known to all bidders in advance.
CRA also expressed
that the value of a comparable meal provided by a comparable facility should be
considered in order to determine the value of the right to attend a fundraising
dinner being sold at auction and to arrive at the eligible amount of the gift.
In a simple example, if a person paid $300 at an auction for a ticket to attend
a fundraising dinner, and a comparable meal is worth $80 (as in the above
example), then the eligible amount of the receipt would be $220, again provided
no other advantages are involved.
reminded charities that the onus is on the charity to ensure that the amount
reported on the donation receipt reflects the fair market value of the property
donated, and to determine the value of the advantage provided in respect of a
gift. In addition, if the value of an advantage cannot be reasonably
ascertained, no charitable tax deduction or credit will be allowed.
Theresa L.M. Man
practices charity and not-for-profit law with Carters Orangeville office. Contact her by email.