There are special rules or considerations for donations of certain types of property. These are.:
Description: Land, and buildings or other structures permanently attached to land.
Examples: A family home, a cottage, or a vacant piece of land.
The value of real property for tax receipt purposes is its fair market value. You should almost always get an appraisal or valuation from a professional real estate appraiser to support the gift.
Real property located in Canada is not subject to the deemed fair market value rule, but property outside Canada is.
Special case: For gifts of ecologically sensitive land, you should refer to the Canadian Ecological Gifts Program.
Description: 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.
Examples: The following properties are generally capital properties:
- securities, such as stocks, bonds, and units of a mutual fund trust; and
- equipment you use in a business or a rental operation.
Capital property is normally valued at fair market value for tax receipt purposes. In some cases, however, the donor (not the charity) can choose a lower value. The donor can do this where their cost of the property for tax purposes (the "adjusted cost base") is less than fair market value. In this case, the donor may choose which value to use so long as it is:
- no lower than the donor's adjusted cost base;
- no lower than the value of any advantage; and
- no higher than the fair market value.
This rule lets donors choose how much capital gain (if any) they recognize for tax purposes on the donation of the capital property.
Note: If the fair market value is less than the adjusted cost base, the donor does not have a choice: the fair market value must be used.
For further information, see CRA's IT-288.
Listed personal property
Description: Certain kinds of property that are intended for personal use or enjoyment and that typically increase in value over time.
Examples: Jewellery, stamp and coin collections, and artwork.
It is often difficult to establish a fair market value for listed personal property since many items are unique. To determine a value for these items, it is usually best to check with an appropriate dealer or to get a formal appraisal.
If the estimated value of the property is more than $1,000, it is strongly recommended that you have the property appraised to support the value for tax receipt purposes.
Special case: If your charity receives a gift of art or cultural property that is deemed to be of national significance and is donated by someone other than its creator, you should have it certified by the Canadian Cultural Property Export Review Board.
Artworks donated by the artist
Description: Artworks that are donated by the person who created them.
Examples: Paintings, sculptures, jewellery, etc., produced by the artist.
Artworks or cultural property donated by the artist are considered to be donated from the artist’s inventory. Inventory is normally valued at fair market value.
In this case, the charity issues the tax receipt for the fair market value.
However, the artist can choose to report a lower value for his or her tax purposes, if the cost of creating the property is less than fair market value. In this case, the value must be:
- no less than the cost of the property to the donor;
- no less than the value of any advantage; and
- no more than fair market value.
This rule lets artists choose how much income they recognize for tax purposes on the donation of the artwork.
For further information see CRA's IT-504.
Use of property
When a donor gives the use of property (for example, provides the use of one's cottage or car) to a charity, this is not a transfer of property and is therefore not a gift. No tax receipt may be issued.
When a charity gives the use of property in return for a gift, however (for example, use of a charity's boardroom in return for a cash donation), this is an advantage. Assuming this advantage can be valued, the split receipting rules apply. If the advantage cannot be valued, then no receipt can be issued for the gift.
Example 1: Use of property as a donation
An individual wants to donate a week at his cottage as a silent auction gift. Since there is no transfer of property, no tax receipt may be issued. However, the charity could "rent" the use of the cottage for a week at its fair market value. The individual could then make a cash donation to the charity equal to the amount of the rent payment and receive a tax receipt in return. (In doing this, the individual may have to include the amount of rent as income, deduct appropriate expenses, and then claim the donation in the usual fashion when filing his or her tax return.)
Example 2: Use of property as an advantage to the donor
A business makes a $1,000 cash donation to a charity. In return, the charity wants to give the business use of its meeting room for a business meeting. If the fair market value of the use of the meeting room was $200, then the charity can issue a tax receipt for $800. As well, the business can likely treat the $200 paid for renting a meeting room as a deductible business expense.
A non-qualifying security is, generally, a security where the owner of the security (e.g. a shareholder) is not at arm's length with the issuer of the security (e.g. a private company). A charity can issue a tax receipt to the donor of a non-qualifying security in some circumstances. The charity should get professional (legal, accounting or tax) help when someone intends to make this kind of gift.