2019-0826691E5 Tax receipts for gifts of cultural property

Principal Issues: (1) Is there a time-frame within which a DIPA must issue a tax receipt after receiving a gift of cultural property? (2) If a DIPA does not issue a tax receipt to the donor of cultural property until several years after the tax year in which the donor gifted the property to the DIPA, can the donor still claim the tax incentives associated with having made a gift of cultural property to a DIPA? (3) If the CCPERB certificate and tax receipt are not issued to a donor until several years after the donor has made a gift of cultural property to a DIPA, in what tax years can the donor claim the tax benefits associated with having made a gift of cultural property to a DIPA?

Position: (1) No. (2) It generally depends on whether a CCPERB certificate and/or a tax receipt are issued in respect of the gift. It may also depend on the application of one or more of the "taxpayer relief" provisions in the Act, where no CCPERB certificate is ever issued in respect of the gift. (3) Generally, a tax deduction or non-refundable tax credit in respect of a gift of cultural property can be claimed in the year that the gift was made and any unclaimed portion can be carried forward for up to 5 years after the tax year in which the gift was made.

Reasons: (1) Legislation. (2) Legislation and previous positions. (3) Legislation, jurisprudence and IC07-1R1 positions.

Author: Campbell, Alison
Section: 39(1)(a)(i.1), 110.1(1)(c), 118.1(1), 118.1(7.1), 118.1(11), 149.1, Part XXXV of Regulations; subsections 152(1) to (6)

XXXXXXXXXX                                                              2019-082669
                                                                                      Alison M. Campbell
August 31, 2020

Dear XXXXXXXXXX:

Re: Tax Receipts for Gifts of Cultural Property

This is in reply to your email of October 10, 2019 and our telephone conversation (XXXXXXXXXX/Campbell) of November 15, 2019, with respect to the donation receipting requirements, under the Income Tax Act (the Act), for an institution or public authority designated under subsection 32(2) of the Cultural Property Export and Import Act (CPEIA) (hereinafter referred to as a DIPA), that has received a gift of cultural property. We apologize for our delay in responding to your request.

The DIPA in respect of which you have asked us to comment issues tax receipts for gifts of cultural property that it receives from individuals, trusts, estates, successions and corporations. The Canadian Cultural Property Export Review Board (CCPERB) will be asked to value and certify the property after the time that the gift was made to the DIPA. However, it is our understanding that the donation receipt will not be issued by the DIPA to the donor until after the CCPERB’s certification and valuation (the CCPERB certificate) is issued. The DIPA would then use the FMV as provided in the CCPERB certificate when completing the donation receipt.

You have advised that, at times, there is a delay of several years between the time that a gift of property is made to a DIPA and the time that the certification and valuation of the property is obtained from the CCPERB. This can result, for example, where the DIPA undertakes the process of applying to the CCPERB for the certification of the property and there is extensive and time-consuming work involved in preparing the application to the CCPERB. There would generally not be a delay in the DIPA issuing a donation receipt once the certification and valuation have been provided by the CCPERB.

Accordingly, you have asked whether there is a requirement for a DIPA to issue a donation receipt within a specific period of time after receiving a gift of such property. You also requested our views on the potential tax implications to donors of cultural property when the DIPA recipient does not issue a donation receipt in respect of the gift until several years after the property is received from the donor.

Our Comments

This technical interpretation provides general comments about the provisions of the Act and related legislation (where referenced). It does not confirm the income tax treatment of a particular situation involving a specific taxpayer but is intended to assist you in making that determination. The income tax treatment of particular transactions proposed by a specific taxpayer will only be confirmed by this Directorate in the context of an advance income tax ruling request submitted in the manner set out in Information Circular IC 70-6R9, Advance Income Tax Rulings and Technical Interpretations. Unless otherwise stated, all references to a statute are to the Income Tax Act R.S.C. 1985 (5th Supp.), c.1, as amended.

Requirement to issue tax receipts

There is no provision in the Act that specifically requires a DIPA to issue a donation receipt when it receives a gift of cultural property and therefore the Act does not set any timeframe for the issuance of a donation receipt after receiving such a gift. When a DIPA does issue a donation receipt in respect of a gift of cultural property that it received, the receipt must include information as prescribed by Part XXXV of the Income Tax Regulations. Such prescribed information includes the fair market value (FMV) of the gifted property which, in the case of a cultural property certified by the CCPERB, would be the FMV as determined by the CCPERB.

Where no tax receipt or CCPBERB certificate is issued

Although a DIPA is not required to issue a donation receipt, if a donation receipt is not issued to a donor for a gift of cultural property, the donor will not be entitled to claim the tax deduction under paragraph 110.1(1)(c) (applicable to corporate donors) or the non-refundable tax credit under section 118.1 (applicable to non-corporate donors) with respect to the gift. In addition, the exclusion, from the donor’s income, of any capital gain that would otherwise be realized on the disposition of the cultural property under subparagraph 39(1)(a)(i.1) would not be available to the donor. Each of subsections 110.1(2) and 118.1(2) require that any claim by a taxpayer for a tax deduction or a non-refundable tax credit, as the case may be, for a tax year in respect of a gift of cultural property must be supported by the appropriate donation receipt issued by the DIPA and the CCPERB certificate. For subparagraph 39(1)(a)(i.1) to apply, only the CCPERB certificate is required.

Delay in issuance of tax receipt and CCPERB certificate

As you have described, it is sometimes the case that a DIPA intends to issue a donation receipt to a donor in respect of a gift of cultural property but there is a multiple-year delay between the time that the gift is made and the time that the donation receipt will be issued because of the length of the process to arrange for the certification of the property by the CCPERB. In such cases, the donor will not have received the donation receipt or the CCPERB certificate by the time of filing their tax return for the tax year in which the gift of cultural property was made. This will cause a delay in the donor being able to claim the tax incentives of having made the gift of cultural property until the CCPERB certificate and tax receipt are received.

A donor is generally considered to have made a gift of cultural property to a DIPA in the tax year in which the ownership of the property legally transfers from the donor to the DIPA. This is also the tax year in which the donor will be considered to have disposed of the property for purposes of calculating any gain or loss on the disposition of the cultural property under subsection 39(1). If a donor claims the incentives of having made a gift of cultural property to a DIPA in filing their tax return for the year in which the gift was made, but is unable to support the claim with the CCPERB certificate and the donation receipt, the incentives may be denied.

When the CCPERB certificate and the donation receipt are received by the donor, after the donor has filed their tax return for the tax year in which the gift of cultural property was made, the donor will generally be able to claim the incentives related to the gift by requesting that the CRA reassess the donor’s tax return for the year in which the gift was made. Subsection 118.1(11) applies when a CCPERB certificate is issued, and allows the CRA to make such assessments or reassessments to a taxpayer’s taxes payable, interest, and penalties for any tax year as are necessary to give effect to the issuance of a CCPERB certificate. In giving effect to the CCPERB certificate, it is the CRA’s general view that the assessment or reassessment will take into account the exclusion from capital gains under subparagraph 39(1)(a)(i.1) and, where the donation receipt issued by the DIPA has also been received by the donor, the tax deduction under section 110.1 or the non-refundable tax credit under section 118.1, as the case may be.

Generally, when supported by the donation receipt and the CCPERB certificate, a donor may claim a tax deduction or non-refundable tax credit, as the case may be, in respect of the eligible amount of a gift of cultural property in the year in which the gift was made or any of the five tax years immediately following that tax year.

Where no CCPERB certificate is issued

If the CCPERB determines that the gifted property cannot be certified as cultural property under paragraph 29(3)(b) of the CPEIA, such that no CCPERB certificate is issued, the above-described incentives with respect to a gift of cultural property to a DIPA would not be available. However, the gifted property may be considered a charitable gift of property (other than cultural property), in the year that the property was gifted to the DIPA, where all the following requirements are met:

*     The DIPA is a “qualified donee” as that term is defined in subsection 149.1(1);

*     The DIPA issues a donation receipt containing the required prescribed information to the donor for the gift of the property; and

*     The tax year of the donor in which the gift was made can still be assessed or reassessed within the statutory limits of the Act by the CRA at the donor’s request.

Generally, under subsection 152(4), the Minister of National Revenue (the Minister) may not assess or reassess the tax payable of a taxpayer under Part I for a taxation year, after the “normal reassessment period”. The “normal reassessment period” for a tax year is defined in subsection 152(3.1) to be the three-year or four-year period, as the case may be, from the date of the taxpayer's original Notice of Assessment. In limited circumstances, at the Minister’s discretion, a taxpayer may be able to have their taxes payable under Part I for a tax year assessed or reassessed, after the end of the normal reassessment period for that year. Such circumstances could involve the filing of a waiver referred to in subparagraph 152(4)(a)(ii). In addition, under the taxpayer relief measure in subsection 152(4.2) the Minister has discretionary authority to make a reassessment after the end of the normal reassessment period in respect of an individual’s taxation year, when so requested by the individual, to determine the amount of any refund or a reduction of an amount payable under Part I for that taxation year. The request must be made in writing on or before the day that is 10 calendar years after the end of the taxation year.

Given that the income tax implications for gifts of cultural property can vary and only be determined on a case-by-case basis, as well as the potential complexities relating to situations where it is anticipated that there may be a delay between the tax year in which a gift is made to a DIPA and the year in which the tax receipt will be issued, donors may wish to seek independent professional tax advice to assist them in obtaining the tax benefits to which they are entitled for gifts of cultural property.

CRA publications

The CRA has a number of publications that may be of further assistance when considering the tax implications for gifts of cultural property to a DIPA. These publications are:

Pamphlet P113, Gifts and Income Tax
Income Tax Folio S7-F1-C1, Split-receipting and Deemed Fair Market Value
Information Circular IC07-1R1, Taxpayer Relief Provisions

We trust our comments will be of assistance.

Yours truly,

Bob Naufal
Manager
Financial Institutions Section
Financial Industries and Trusts Division
Income Tax Rulings Directorate
Legislative Policy and Regulatory Affairs Branch

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