PROPERTY DONATION
Do you have property to donate? (Click for Government Canada)
Here are some things to keep in mind when you donate property:
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Any capital gain you have made on the property since you acquired it may be subject to tax. For more information, see Capital gains and losses.
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Your own situation will affect the tax treatment of the gift. If you are an artist, a dealer, a collector, or an individual carrying on a business, different tax rules apply when you donate property from your inventory.
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You have to decide to which organization you are going to donate your property. The CRA cannot advise which museum, art gallery, archive, municipality, or institution you should approach. Remember that the tax implications may differ depending on the way in which you make the gift and to whom.
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Once you have chosen a qualified donee, and have determined that it is willing to accept your gift, you or the qualified donee may need to have the property appraised to determine its fair market value.
Gifts of capital property (Click for Government Canada)
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.
The following properties are generally capital properties:
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cottages
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securities, such as stocks, bonds, and units of a mutual fund trust
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land, buildings, and equipment you use in a business or a rental operation
Capital gains realized on gifts of certain capital property (Click for Government Canada)
If you donated certain types of capital property to a registered charity or other qualified donee, you may not have to include in your income any amount of capital gain realized on such gifts. You may be entitled to an inclusion rate of zero on any capital gain realized on such gifts.
The inclusion rate of zero applies if you donate any of the following property:
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a share of the capital stock of a mutual fund corporation
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a unit of a mutual fund trust
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an interest in a related segregated fund trust
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a prescribed debt obligation
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certified ecologically sensitive land including a covenant or an easement to which land is subject or, in the case of land in Quebec, a personal servitude where certain conditions are met or real servitude gifted to a qualified donee other than a private foundation (for more details see Gifts of ecologically sensitive land)
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a share, debt obligation, or right listed on a designated stock exchange
For donations of publicly traded securities, this treatment is extended to any capital gain realized on the exchange of shares of the capital stock of a corporation for those publicly listed securities donated when they meet all of the following conditions:
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at the time they were issued and at the time of disposition, the shares of the capital stock of a corporation included a condition allowing the holder to exchange them for the publicly traded securities
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the publicly traded securities are the only consideration received on the exchange
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the publicly traded securities are donated within 30 days of the exchange
In cases where the exchanged property is a partnership interest (other than prescribed interests in a partnership), the capital gain will generally be whichever of the following amounts is less:
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the capital gain otherwise determined
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the amount, if any, by which the cost to the donor of the exchanged interests (plus any contributions to partnership capital by the donor) exceeds the ACB of those interests (determined without reference to distributions of partnership profits or capital)
If you donate property to a qualified donee, that is, at the time of the donation included in a flow-through share (FTS) class of property, in addition to any capital gain that would otherwise be subject to the zero inclusion rate discussed earlier in this section, you are deemed to have a capital gain from the disposition of another capital property equal to whichever of the following amounts is less:
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the amount of your exemption threshold, at that time, in respect of the FTS class of property
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the total capital gains from the actual disposition
For more information, call the CRA at 1-800-959-8281.
If there is no advantage received in respect of the gift, the full amount of the capital gain is eligible for the inclusion rate of zero. However, if there is an advantage in respect of the gift, only a portion of the capital gain is eligible for the inclusion rate of zero. The rest is subject to an inclusion rate of 50%.
The amount subject to the inclusion rate of zero is calculated using the following formula:
A × (B ÷ C)
Where
A = the capital gain
B = the eligible amount of the gift
C = the proceeds of disposition
Report all donations of these properties on Form T1170, Capital Gains on Gifts of Certain Capital Property, whether the inclusion rate is 50% or zero. Report the applicable amounts calculated on this form on line 13200 or line 15300 of Schedule 3, Capital Gains (or Losses).
Note
The capital gain realized on an exchange of partnership interests for publicly listed securities that are then donated should not be reported on Form T1170. Instead, it should be reported directly on line 17400 of Schedule 3.