A gift in kind refers to a gift of property other than cash such as capital property (including depreciable property) and personal-use property (including listed personal property). A gift in kind does not include a gift of services.
Donors and qualified donees often approach appraisers, dealers, and other people who are knowledgeable about particular objects to get appraisals for income tax purposes. Determining fair market value (FMV) is not a simple process. You must consider numerous facts regarding the property.
You may need to get one or more appraisals to establish the FMV of the property you are donating. Use the appraised FMV to calculate the eligible amount of the gift unless the deemed FMV rules apply. The eligible amount is used to calculate the tax credit you can claim on your return. The appraised FMV is also used in the calculating any capital gain or loss you may have from donating your property.
For every situation, whether the property is personal property, real property, or intangible property, donors and qualified donees are encouraged to contact a professional appraiser, valuator, or other individual who is accredited in the field of valuation. That individual should be knowledgeable about the principles, theories, and procedures of the applicable valuation discipline and follow the Uniform Standards of Professional Appraisal Practice or the standards of the profession. Also, he or she should be knowledgeable about and active in the marketplace for the specific property.
The chosen individual should be independent. For instance, he or she should not be associated with the donor, the qualified donee, or another party associated with the purchase, sale, or donation of the property.
The individual should also be knowledgeable about the elements of a properly prepared and credible valuation report.
Gifts of property with an FMV of less than $1,000 will probably not require a professional appraisal, but the donor should keep all documents supporting the determination of the FMV, in case we ask to see them.
The appraisal or valuation report should be based on the principles, theories, and procedures of the applicable valuation discipline and follow the standards of the profession. The report has to be an estimate of the FMV of the property as of the date of donation. Also, if you owned the property on valuation day (December 31, 1971), you may need to get a valuation reflecting the value on that date.
The donation date is the date that the gift is made. The donation date may not be the date of physical delivery, since a property may be on loan to the qualified donee before the actual donation date.
Under proposed changes, the eligible amount of a gift made is deemed to be nil if the donor fails to inform the donee of information that would be relevant to the application of the limitations regarding deemed FMV
For donations of gifts in kind, the qualified donee can issue an official donation receipt after the property has been appraised. The receipt should show the FMV or deemed FMV of your gift. It will also show the eligible amount of the gift.
If your gift comes under the Cultural Property Export and Import Act, and the CCPERB has certified it, you will receive Form T871, Cultural Property Income Tax Certificate, from the Board. Attach Form T871 and the official receipt from the qualified donee accepting your gift, to your return.
If your gift is ecologically sensitive land that the federal Minister of the Environment has certified as important to the preservation of Canada's environmental heritage, you will receive a Certificate for Donation of Ecologically Sensitive Land. Attach the certificate and official receipt to your return.
If the land you give is located in the province of Quebec, you will receive a Certificate Respecting Gifts of Land with Ecological Value or Servitudes Encumbering Land with Ecological Value, issued by the ministère du Développement durable, de l'Environnement et des Parcs. Attach the certificate and the official receipt to your return.
Generally, the eligible amount that qualifies for the tax credit applies for the year you give the gift. You can choose the part of the eligible amount of the gift you want to claim in the year and you can carry forward any unused part for up to five years.
If you are filing a paper return, include your Schedule 9, as well as your official receipts showing either your or your spouse's or common-law partner's name. You do not have to attach receipts for amounts shown in box 046 of your T4 or T4A slips, in box 48 of your T3 slips, in box 103 of your T5013 slips, or on financial statements showing an amount a partnership allocated to you. If you receive a T5003 slip(s) with an amount in box 13, you must submit this slip as well as a charitable donation receipt that you will receive from the charity. You must also complete and attach to your return Form T5004, Claim for Tax Shelter Loss or Deduction.
You may have included with a previous return, a receipt for a donation you are claiming for the current year. If so, attach a note indicating the return with which you submitted the receipt. However, if you are filing electronically, keep all of your documents in case we ask to see them.
Capital property includes depreciable property, and any property that, if sold, would result in a capital gain or a capital loss. Capital property does not include the trading assets of a business, such as inventory.
If you donate capital property, we consider you to have disposed of that property for proceeds equal to the fair market value (FMV) of the property. You have to report any capital gain on your return in the year you donated the property. In some cases, you may be able to claim a capital loss in the year you donated the property.
However, if you make a gift of capital property to a registered charity or other qualified donee such as Canada or one of its provinces or territories, and the FMV of the donated capital property, otherwise determined, is more than its adjusted cost base (ACB), you may designate an amount that is less than the FMV to be the proceeds of disposition. This may allow you to reduce the capital gain otherwise calculated.
Treat the amount you choose as the proceeds of disposition when you calculate any capital gain. Also use this amount to determine the eligible amount of the gift, which you need to calculate the tax credit.
If when you made the donation, the FMV was less than the ACB, the proceeds of disposition must equal the FMV of the donated property. This amount will be used to calculate any capital loss on the disposition of a non-depreciable capital property and the eligible amount of the gift, which you need to calculate the tax credit.
For more information, see Interpretation Bulletin IT-288, Gifts of Capital Properties to a Charity and Others.
If a gifted property was acquired in a non-arm's length transaction during the 3-year or 10-year period, the cost (or ACB if it is capital property) of the gifted property will be deemed to be equal to the lower of the cost to the donor and the lowest cost to a party to the non-arm's length transaction.
If a donor attempts to avoid limitations with the acquisition or disposition of a property before gifting it, the eligible amount of the gift is deemed to be nil. This rule applies to gifts made after July 17, 2005.
If an applicable property is sold to a registered political organization or candidate or a qualified donee and all or part of the proceeds of disposition is property that is the subject of a gift or monetary contribution, the FMV of the gift or monetary contribution is deemed to be the lesser of the FMV of the property sold and its cost.
If the property was acquired through a tax shelter that is a gifting arrangement, the eligible amount will be reported in box 13 of Form T5003, Statement of Tax Shelter Information.
The additional deductionis equal to 50% of the amount of the taxable benefit, which may effectively exempt from tax the employment benefit associated with the exercising of the stock option.
For more information on gifts to private foundations, see Capital gains realized on gifts of certain capital property.
If you are an artist, we usually consider any works you create and own as inventory, not capital property. When an artist creates a work of art intending to sell it but instead donates it to a qualified donee, we consider the gift to be a disposition of property from the artist's inventory.
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.
If, at the time you made the donation, the FMV is less than the cost amount, the proceeds of disposition must equal the FMV of the donated property. This amount will also be used to calculate the eligible amount of the gift, which you use to calculate the tax credit.
As an artist, you may donate a work of cultural property you created, from your inventory, to a designated institution or public authority. If you do this, and the Canadian Cultural Property Export Review Board (CCPERB) certifies the gift, we consider that you received proceeds of disposition equal to the greater of the cost amount of your gift and the amount of any advantage in respect of the gift. The amount that qualifies for the tax credit on certified cultural property will be based on the eligible amount of the gift, provided you meet all other requirements outlined in the section called "Gifts of certified cultural property."
An artistic endeavour occurs when you are in the business of creating paintings, murals, original prints, drawings, sculptures, or similar works of art. An artistic endeavour does not include reproducing works of art.
When you calculate your income from an artistic endeavour, you can choose to value your ending inventory at nil. If you do this, we consider the cost amount of your gift to be nil. Your choice stays in effect for each following year, unless we allow you to change it. For more information, see Interpretation Bulletin IT-504, Visual Artists and Writers.
If you buy and sell art, antiques, rare books, or other cultural property as a business, and you donate one of these objects, we consider the objects as part of your inventory, not capital property or personal-use property. Therefore, we consider the proceeds to be business income based on the fair market value of the donated property at the time you donated it. You can claim a tax credit based on the eligible amount of the gift if it otherwise qualifies.
If your gift is from a private collection that you maintain apart from those works we consider to be your business inventory, the usual rules for donating capital property or personal-use property apply.
We consider all or any part of such properties, a part interest in them, or any right to them, as listed personal property. You should have a Valuation Day value established for any listed personal property you acquired before December 31, 1971, that is worth more than $1,000, either separately or as a set. In most cases, you may find an indication of the fair market value for many of these items by checking dealers' catalogues, or by asking art antiques, coin, jewellery, or stamp dealers.
Special rules may apply to personal-use property and listed personal property. For more information, see Guide T4037, Capital Gains.