Accrual accounting is the method of recording transactions, where revenues and expenses show in the results for the period in which they were earned and/or incurred, whether or not cash has changed hands for the transaction.
Generally, the adjusted cost base is the amount originally paid for a property, plus the costs (such as legal fees or surveys) associated with the purchase, plus the cost of any improvements to the property.
An advantage is the total fair market value of all property, services, compensation, or other benefits that a donor receives or is entitled to receive in return for making a gift. The benefits may be contingent or receivable in the future, by either the donor or any person or partnership not dealing at arm's length with the donor.
Determining the fair market value of an advantage is similar to determining the fair market value of a gift in kind. However, while only property is a gift in kind, all types of advantage (for example services, accommodation, use of property) must be valued.
Arm's length describes a relationship where individuals are independent of each other and are not related.
Related persons are individuals who are related by blood, marriage or common-law partnership, or adoption. Related persons also include individuals or groups and the corporations in which they have a controlling interest. Persons related to these individuals or groups are also considered related to those corporations.
For more information on arm's length, see Interpretation Bulletin IT-419, Meaning of Arm's Length.
Associated charities are two or more registered charities that have applied for and received this designation from the CRA. Associated charities can pass funds among themselves without being affected by the usual limitation placed on gift-making by charitable organizations.
The BN ('Business Number') is used by the federal government to identify organizations and the various program accounts they have. A complete BN has two parts: the registration number (first nine digits) and the account identifier (two letters and four digits). The registration number is the same for all accounts you have with the federal government. The account identifier is assigned by the Canada Revenue Agency for each of its business programs including payroll deductions, goods and services tax/harmonized sales tax (GST/HST), and registered charities. The registered charity account identifier always starts with the letters 'RR'.
When you deal with the Charities Directorate, you must use the RR number designation. If you are unsure of your registered charity's number, please contact the CRA.
Bylaws are part of the governing documents of an organizations, and include rules about the organization's operation. Bylaws often provide the methods for the election of directors, the appointment of officers and the description of their duties, the creation of committees, and the conduct of meetings, etc.
Capital property is any property that, when sold, results in a capital gain or capital loss. It does not include the trading assets of a business, such as inventory. Capital property is usually bought for investment purposes or to earn income.
A charitable activity is an activity carried out by a registered charity to further its mission.
The chart of accounts is the master list of account codes (consisting of numbers and/or letters) and account names used to classify, record, budget, and report financial transactions in a general ledger.
Compensation, for a person (employee) working full-time or part-time for a registered charity, includes salaries, wages, commissions, bonuses, fees, and honoraria paid to the person, plus the value of taxable and non-taxable benefits.
An activity that relates to and supports a charity's purpose and is a reasonable way to achieve it.
A legal document that sets out the fundamental principles and structure of an organization that is not a corporation.
Depreciable property is a type of capital property, usually used to earn income from a business or property. It is property that is expected to decline in value, or be used over a number of years, such as vehicles, machinery, etc. The cost of this property can be "depreciated" (or "amortized") over a number of years.
The directors (or 'trustees') of an organization are the individuals who are elected or appointed as members of the governing body of the organization.
The disbursement quota (or DQ) is the minimum amount a registered charity has to spend on charitable activities or gifts to qualified donees to keep its registered status.
A donee is the recipient of a gift. See also "qualfied donee" and "eligible donee".
A person, foundation, or corporation that makes a gift.
The eligible amount is the part of a gift for which a charity can issue a tax receipt. Generally, this is the amount by which the fair market value of the gift exceeds the amount of any advantage given in respect of the donation.
Generally, an eligible donee is a registered charity that is in good standing with the Canada Revenue Agency, and that has more than half of its directors at arm's length with each of the directors of the charity gifting to it.
An individual is eligible to serve as a Director of a charity, unless the individual:
• has been found guilty of a relevant criminal offence for which the individual has not received a pardon;
• has been found guilty of a relevant offence in the last five years;
• was a director, trustee or like official of a charity or RCAAA during a period in which the charity was engaged in conduct that constituted a serious breach of the requirements for registration, for which its registration was revoked in the past five years;
• controlled or managed a charity or association during a period in which the charity was engaged in conduct that constituted a serious breach of the requirements for registration for which its registration was revoked in the past five years; or
• has been a promoter of a tax shelter that involved a gift to a registered charity or RCAAA the registration of which was revoked within the last five years for participation in the tax shelter.
Fair market value is usually the highest dollar value that can be obtained for a property in an open and unrestricted market and between a willing buyer and a willing seller, both of whom are knowledgeable, informed, and acting independently of each other.
The fiscal year is the time period for which financial reporting is prepared and submitted to the Canada Revenue Agency and others. The fiscal year for a registered charity can not exceed 53 weeks.
The general ledger is the main financial record for summarizing all of an organization’s financial transactions, and is the basis for preparing all of its finanical statements and reports.
Generally, a gift is a voluntary transfer of property to a charity that is intended to enrich the charity.
A service (that is, providing time, skill or effort) is not property and, therefore, is not a gift.
A gift in kind is a gift other than cash.
These are the documents that form an organization and govern its operations. Some examples of governing documents are letters patent, certificate of incorporation, memorandum or articles of association, constitution, trust documents, and bylaws.
Listed personal property is property that is generally held for a long time and that increases in value over its life. Examples are jewellery, stamp and coin collections; prints, etchings, drawings, paintings, sculptures, or other similar works of art; rare folios, rare manuscripts, or rare books.
Minutes are a written record of the matters discussed, and decisions made at a meeting. They are based on notes taken - usually by the individual designated as Secretary - and are generally presented to a subsequent meeting of the same group for approval. Once approved, a copy of the minutes is generally signed by the chair of the meeting that the minutes report on and the secretary who recorded them, to indicate their official status. Minutes should be kept as a permanent record, and are often kept in a minute book.
A non-qualifying security includes shares, obligations, or other securities of a corporation with whom the donor does not deal at arm’s length.
A non-qualifying security includes shares, obligations, or other securities of a corporation with whom the donor does not deal at arm’s length.
Registered charities may issue an official donation receipt (or "tax receipt") to acknowledge a gift. An official donation receipt is subject to particular requirements under the Income Tax Act including identification that it is an official receipt for income tax purposes.
Registered charities can also issue other forms of receipts to acknowledge receipt of services or other items that are not gifts. These are not tax receipts and should be clearly distinguished from the tax receipts issued to acknowledge gifts.
Political activities are partisan if they directly or indirectly support or oppose a political party or candidate for public office.
Personal use property refers to items that you own primarily for the personal use or enjoyment of your family and yourself. It includes all personal and household items, such as furniture, automobiles, boats, a cottage, and other similar properties. It also includes listed personal property.
Qualified donees are generally organizations that can issue official tax receipts for gifts.
Synonyms: Qualified doneesA qualifying security is a security that is traded on a recognized stock exchange. The donation of a qualifying security is eligible for a tax receipt.
Real property (or "immovable property") is land or a building, or an object that is permanently affixed to land or a building.
A charity’s resources include all its financial assets, staff, volunteers, directors, premises, and equipment.
A source document is an original document that records and reflects a transaction between parties.
Sponsorship occurs when a business makes a donation to a charity and in return receives advertising or promotion of its brand, products, or services.
Generally, tax receipts cannot be issued for sponsorships. However, the cost of the sponsorship to the business is generally considered a tax-deductible business expense, which is typically as attractive to a business as a donation receipt.
Activities are subordinate if they that are subservient to a charity's charitable purpose or are a minor focus of the charity in relation to its entire program of activities.
The Canada Revenue Agency generally considers “substantially all” to mean 90% or more.
Generally, a tax shelter is any arrangement where the tax benefits equal or exceed the net cost of entering into the arrangement.
