What are Gifts in Kind?
Gifts-in-Kind are donations of property or assets. Often people are interested to know if a donation of a service qualifies as a gift in kind. Here is Canada Revenue Agencies answer to that question:
Gifts in kind of a taxpayer include capital property, depreciable property, personal-use property including listed personal property (see the current version of IT-332), a leasehold interest, a residual interest (see the current version of IT-226), a right of any kind whatever, a licence, a share, a chose in action and inventory of a business. A gift in kind, however, does not include a gift of services.
Gifts of services are still possible, but require several distinct transactions to satisfy CRA guidelines. Here is an example:
The Donor wishes to give CFI Canada a real estate property and maintenance services. Under CRA rules, the property would qualify as a gift-in-kind and would be eligible for a tax receipt based on fair market valuation. The maintenance services are not a gift-in-kind. The procedure to process that gift would be for the donor to: 1) donor provides the services 2) donor issues a fair market value invoice to CFIC 3) CFIC to issues a cheque to pay the invoice 4) the donor makes a gift to CFIC in the amount of the invoice/payment. This creates separate financial transactions at each step of the process in the fair market value of the service.
Another common question about Gifts-in-Kind regard the value of the charitable receipt. Charitable receipts must be issued for the fair market value of any gift-in-kind. Again, using CRA as our reference:
The fair market value of a gift in kind is also the relevant amount for the purposes of calculating the non-refundable and non-transferable federal tax credit under subsection 118.1(3) for individuals after 1987 and the deductible gift under subsection 110.1(1) for corporations after 1987, as well as the deductible gift under the legislation as it applied to all taxpayers prior to the 1988 taxation year. The fair market value of a gift in kind as of the date of the donation (the date on which beneficial ownership is transferred from the donor to the donee) must be determined before an amount can be recorded on a receipt for tax purposes. If the property was owned on Valuation Day (December 31, 1971), a valuation as of that date may also be required for capital gains purposes. The person who determines the fair market value of the property must be competent and qualified to evaluate the particular property being transferred by way of a gift. Property of little or only nominal value to the donor will not qualify as a gift in kind. Used clothing of little value would be an example of a non-qualifying contribution.
Gifts in Kind can be a terrific way to support CFI Canada. A few of our current needs include:
- office supplies (paper, pens, etc)
- real estate to establish a physical branch in your community
- cars (for scrap or resale) through Donate A Car Canada
- relevant art or collectibles for the CFIC library
- books for the CFIC library
- vacation property for annual fundraisers (eg. time shares, cottage)
We recommend that supporters familiarize themselves with Canada Revenue Agencies (CRA) charitable giving guidelines for Gifts-In-Kind.