CRA Compliance

A Guide to Charitable Receipting for Non-Cash Gifts

A few stories have emerged that shed light on the subject of the value of a name, while also drawing attention to the potential ambiguity surrounding the receipt of non-cash gifts. This post will concentrate on the guidelines established by the Canada Revenue Agency (CRA) concerning non-monetary donations, taking into account the complex and often misunderstood regulations governing the issuance of receipts.

What is a gift

To dispel a widespread misconception, not all valuable items donated to a registered charity are eligible for a receipt.

Registered charities are empowered by the regulations stated in the Income Tax Act to issue official donation receipts for income tax purposes, granted that the donations fulfill the necessary criteria to be deemed qualifying gifts. Generally, a gift is described as the voluntary transfer of property without any valuable consideration or advantage provided to the donor.

Moreover, in order for non-cash gifts to qualify for a tax receipt, it is imperative that the item is donated with a sincere charitable intent. Even if a transfer of property includes an advantage received by the donor, it can still be classified as a gift as long as it can be determined that the transfer was made with the intention to give. The crucial factor is the presence of a clear donative intent to benefit the charity and enhance its resources.

In order for a non-cash gift to be eligible for a receipt, it must meet four essential elements:

  1. Voluntary: If a donation is made due to a legal or contractual obligation, such as a court order, a receipt may not be issued.
  2. Complete transfer: Merely pledging to donate something in the future or providing an object without fulfilling all the necessary steps to transfer ownership is insufficient. For example, simply handing over a property and keys to a charity is not enough; the complete transfer of ownership must be arranged through the appropriate authorities.
  3. Property: Property encompasses various forms of assets, including cash, cheques, credit card payments, money orders, wire transfers, and certain tangible items like computers, furniture, cars, and land. However, services are not considered as part of property in this context.
  4. Intention to make a gift: According to the Income Tax Act, if a donor obtains an advantage that exceeds 80% of market value of the gift, it is usually considered that there is no intent to make a gift, and the individual will not collect a receipt for tax purposes.

What isn’t a gift

Although a gift may seem to fulfill the four elements mentioned earlier, there are specific situations where a non-monetary gift will not be eligible for a receipt.

Many charitable organizations struggle with determining the accurate fair market value of a gift, leading to frequent errors in identifying the types of gifts eligible for an official donation receipt.

The CRA maintains a basic list of gifts that are not receiptable. These include:

  1. Transfer of property to a qualified donee as mandated by the court.
  2. Payment of a standard fee for entry into an event or program.
  3. Payment for a lottery ticket or similar chance-based opportunity.
  4. Acquisition of goods or services from a charitable organization.
  5. A contribution in which the fair market value of the benefit or advantage offered to the donor surpasses 80% of the donated value.
  6. A non-monetary donation where the fair market value is unable to be calculated.
  7. Donations given in exchange for advertising or sponsorship.
  8. Gifts of services, such as donated time or labor.
  9. Gifts in the form of commitments, such as donated gift certificates from the issuer or hotel accommodations.
  10. Pledges.
  11. Loans of property.
  12. Use of a timeshare.
  13. Lease of premises.

Additionally, individual charitable organizations frequently maintain their own specific lists of items they do not accept or consider for a tax receipt exchange. This places a greater responsibility on donors to conduct thorough research to determine the eligible avenues where they can receive a tax receipt.

How can I ascertain the fair market value of my non-cash gift?

When individuals contribute physical assets as donations, a charitable organization can issue an official donation receipt if the fair market value of the assets can be evaluated.

The CRA and Canadian courts have relied upon a general definition of fair market value. Fair market value is usually considered to be the highest monetary value that a property could attain in an open and unrestricted market. It is determined by a transaction between a knowledgeable, well-informed, and prudent buyer and seller, both of whom are willing participants and act independently of each other.

Provided that the fair market value of a non-monetary donation can be assessed, an official donation receipt can be issued for the equivalent fair market value, with any associated benefits deducted. For instance, let's consider the scenario where John participates in a fundraising golf tournament by paying $300. In this case, the charity does not provide John with a $300 official donation receipt. Instead, the charity must deduct the value of the advantages John received, which may include expenses for meals, entertainment, and door prizes. If the total value of these advantages amounts to $125, John's tax receipt will reflect a value of $175.

Charitable organizations are unable to issue an official donation receipt in a case where the fair market value of a gift-in-kind or an associated benefit cannot be calculated, as they are unable to rely on donors to provide information regarding the fair market value.

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