Gifting and receipting
Questions and answers
The following consists of questions from the English and French webinars. Additional questions and answers can be found by viewing Questions and answers about gifting and receipting, or by reading the webinar transcript.
Eligibility of a gift
Q1. Our charity held an auction where various items were being auctioned to raise funds for our charitable programs. The auction was being handled by an auction house. Would the buyers be eligible for an official receipt for income tax purposes?
A1. Generally, a receipt should not be issued to the buyer because the price paid is considered to be its actual value in circumstances typically surrounding a sale to the highest bidder, meaning that no gift was made. However, there can be certain situations where it can be established that the buyer otherwise knowingly paid more than the item was worth, and therefore made a gift.
Q2. We hold several silent auctions every year, for which local artists donate their artwork. Can I use the price of similar items these artists have previously sold as a point of comparison to determine the fair market value (FMV)?
A2. In short, yes. If a local artist is established commercially and has sold works of art, these have a certain value. We consider that the local artist is a business that makes a gift of inventory and is entitled to the item’s FMV, which is the price at which it would have been sold. The situation becomes a bit more complicated if the artist is more of an amateur than a professional and, as such, no real commercial value is attached to the item. In that case, the artist would only be entitled to a receipt for the cost of the supplies used to create the artwork. Therefore, you would have to determine whether each artist is acting as a business or as an amateur.
Q3. At a future activity, an artist will be on-site to do a painting live. We are not paying her, but she is asking for a receipt for $1,500, the value of her painting. The painting will then be auctioned. Assuming that we sell it for $3,000, a receipt for $1,500 will also be issued to the person who purchases the painting. Is this the correct procedure for issuing two receipts?
A3. Assuming that the artist is a professional artist, as she assumes that her painting is worth more than $1,500, we would recommend that you have the painting appraised by a third party. Its actual value may be more than the artist thinks and you cannot really issue a receipt for more than the fair market value, so you must ensure that you know that actual value. You will also need it for the auction. In addition, the artist is also entitled to have you indicate an amount on the receipt equal to the fair market value, or less if she wishes, but greater than what it cost her to create. Then, at the auction, you will use the fair market value to determine the value of the receipt you can issue to the purchaser. I will give an excellent example later of an auction. You will then understand how to determine the value of the receipt that you issue to the purchaser.
Q4. A volunteer has used their own vehicle to travel to the charity's premises to perform volunteer work. Can the volunteer receive an official receipt for income tax purposes for the cost of fuel?
A4. No. A charity cannot simply issue an official receipt for income tax purposes to a volunteer for the amount of the expenses instead of reimbursing the expenses. However, it may be possible to: a) issue a receipt when a right to reimbursement for the expenses has been established, or b) perform an exchange of cheques (that is, the charity issues a cheque to the volunteer covering the costs incurred and the volunteer then writes a cheque to the charity for an equal or lesser amount). For more information, go to Policy Commentary CPC-012, Out of pocket expenses.
Q5. How can we give an official receipt for income tax purposes to someone who donates their services?
A5. "Gifts" of services do not qualify for a receipt. Services (that is, time, skills, or work) are not property, and they therefore do not qualify as gifts for the purpose of issuing an official receipt for income tax purposes.
That being said, a charity can issue an official receipt for income tax purposes if a person provides a service to the charity, the charity pays for the service, and the person then returns the payment to the charity as a gift. In such circumstances, two transactions have taken place: the first being the provision of a service and the payment flowing there from, and the second being a gift. For more information, go to Policy Commentary CPC-017, Official donation receipts - Whether gifts of services qualify as charitable donations.
Q6. If we hold a luncheon with food donated by our members, to raise money for a scholarship fund, is there any way we can give an official receipt for income tax purposes to our members for the donated food?
A6. Yes. If the fair market value of the donated food can be established, the donations can be receipted accordingly.
Q7. I received a donation of new sheets from a hotel. Can I issue a tax receipt?
A7. Yes, you could determine the fair market value of the sheets. The hotel probably received a receipt when they purchased the sheets. That receipt could provide you with the fair market value of the sheets and you could then issue a receipt equivalent to their cost.
Q8. When businesses or individuals organize events for our benefit and remit the benefits to us, tax receipts can be issued to the people who buy tickets. However, can receipts also be issued to those who donate services, such as artists who donate their fee to the event organizer?
A8. Effectively, you can… if someone organizes an activity on your behalf and you receive the funds, you can issue receipts for the eligible donation amount by calculating what was received at the activity, i.e. everything they donated. For artists who perform at an event, if they donate their services, those services are not paid at all, and they do not give you a donation cheque, you cannot issue receipts for service donations. The artist would have to be paid for the service and then give you another cheque equivalent to the fees that you paid.
Q9. A charity faces an exceptional circumstance where the amount of the advantage back to the donor exceeds 80% of the value of the property given to the charity. What are the circumstances that will satisfy the Minister that a gift was actually made?
A9. If the amount of the advantage to the donor exceeds 80%, it is deemed that no gift has been made, and therefore no receipt can be issued to the donor. However, we will consider exceptions to the rule on a case-by-case basis. Contact us at 1-800-267-2384.
Q10. Can registration fees for a sports tournament be receipted if all of the proceeds go to the charity?
A10. No. Providing a receipt would not be acceptable since the individual paying the fees has the opportunity to take part in the tournament. Because of this opportunity, it is not possible to determine the fair market value of the benefit provided to the person as regards their participation in the event. As such, there is no donation, which means no receipt can be issued.
Q11. Can a church issue an official receipt for income tax purposes for a dinner where the ticket price is $30.00, and the value of the dinner is $10.00? Can a receipt be issued for $20.00 per ticket?
A11. Yes. The eligible amount of the receipt would be $20.00.
Issuing official donation receipts
Determining the value of a gift
Q12. Some volunteers use their car to take cats to the vet. Can they be issued a receipt for income tax purposes to cover the expenses incurred to do this? If so, how do we calculate the amount, and what documentation is the volunteer required to provide?
A12. You can reimburse their expenses, absolutely. The receipting operation is slightly different, you have two options. If the volunteer works for your organization and incurs an expense, you can pay them for the expense, then the volunteer can gift this amount back to you, and, at this point, you can issue a receipt. On the other hand, if the volunteer has a right to reimbursement, meaning that their contract indicates in any way that they are entitled to a reimbursement, they can renounce this right, and you can treat this as a gift in kind and issue a receipt without an exchange of cheques. As for the necessary documentation, you have to take the costs into account. You can use gas receipts and other such items to determine the amount of the reimbursement.
Q13. Our charity operates in Africa. Once a year, a team of health professionals comes to Africa to run the clinics. Each member pays for their own trip. Are these expenses eligible to a charitable receipt?
A13. This is similar to reimbursing expenses. If the employees pay for their own trip, which according to you is what they are doing, the charity may reimburse these amounts. The employees can then gift the same amount to the charity and get a receipt for a gift in cash. I believe I mentioned this during another question period, and you can check out the policy on out-of-pocket expenses on our website.
Q14. Can we provide a receipt for income tax purposes to event promoters?
A14. Sponsorship is complicated. The short answer is no, you cannot. This is because it is impossible to determine the value of the sponsorship. If they print large banners and people think they are advertising your charity, you cannot issue a receipt. However, this organization probably doesn’t want a receipt, since it will deduct this amount as an promotional expense. The difference is simply in the recognition. As such, if you distribute pamphlets during your event and that each promoter receives the same level of recognition (small print, on the back of the page), this is not considered advertising and you may be able to issue a receipt for the amount.
Q15. If an individual buys specific items or supplies that are provided to the registered charity, for example building maintenance or renewal, and they do not wish to be reimbursed, can the charity issue a receipt for the value of the purchases if there are receipts showing the costs of the items that were purchased?
A15. If the individual does not wish to be reimbursed for the supplies, you can issue a thank-you note to acknowledge that you’ve received the gift. If the individual wishes to be reimbursed through an official receipt for income tax purposes, you can use the receipts provided by the individual to issue a receipt for the cost of the items, minus any tax.
Q16. At an activity, a car dealer lends us a car and asks for a receipt for $5,000, stating that is the rental value. Can we issue a receipt for that amount?
A16. The loan of a car is a service, or a rental. Receipts cannot be issued for services.
Q17. An artist offers a painting that is then sold at auction. The painting was not appraised. Can we assume that the fair market value of the painting is the price obtained at auction?
A17. No, you cannot. You must actually determine the fair market value before the auction in order to issue a receipt to the artist. By knowing the fair market value, you will be able to issue a receipt for the true value and, even if the painting is sold at auction for less or more, the artist will only receive the fair market value.
Q18. We want to create a campaign that will be directly funded by donations from the paycheques of employees at our establishment. We are proposing to offer them a poinsettia worth at least $5 for Christmas, which represents at least 10% of the value of the donation. My question concerns fair market value. How do we determine it, since four-inch poinsettias can be found for $4.95 or for $12?
A18. When you buy your poinsettias to give as gifts to your donors, you simply use the price you paid for them. If you purchase them for $5, you can then subtract… if the $5 corresponds to less than 10% of the value, you do not even need to subtract the value of the poinsettia from each donor's donation receipt. I think you understand the de minimis rule. We will explain this later. To determine the fair market value, you can use the purchase price for the poinsettias.
Q19. Someone has given us a desk and would like an official receipt for income tax purposes. They do not have the original invoice. How do we determine the amount of the receipt?
A19. The fair market value of the item must be established before an official receipt for income tax purposes can be issued. If the value of an item is presumed to be over $1,000, we recommend contacting an independent appraiser. In such a case, an independent appraiser may be an office furniture retailer or an antique dealer. Generally, if the fair market value of the property is presumed to be less than $1,000, a member of the registered charity, or another individual, with sufficient knowledge of the property may determine its value. If the charity cannot establish a fair market value, they are not obliged to accept the donation and consequently would not issue a receipt. If the item appears to be of nominal value, no receipt should be issued. For more information, see Determining fair market value.
Q20. A donor wishes to donate a gift-in-kind (i.e., a non-cash gift) to a charity. Does the donor have to provide a receipt of some kind to prove the original purchase price of the item before the charity can issue an official receipt for income tax purposes?
A20. Generally it is not necessary for the donor to show such a receipt, provided it is otherwise easy to establish the fair market value of the item that is being donated. However, please refer to Pamphlet P113, Gifts and Income Tax for information on deemed fair market value. If the donor purchased the item less than three years prior to the donation, they can only get a donation receipt that reflects the lesser of (a) the cost to the donor at that time and (b) the current fair market value.
Q21. Can a donor receive a single official receipt for income tax purposes for the several donations they made during the year?
A21. Yes, provided the receipt is for cash donations only. Many charities will do this; however, charities are encouraged to inform the donor that this is their policy when they receive a donation. For non-cash donations (gifts-in-kind), a charity must issue a separate receipt for each gift.
Q22. Who can write an official receipt for income tax purposes on behalf of the charity? Anyone?
A22. No. The charity must decide who writes and/or issues donation receipts, and should establish internal controls to ensure that receipts are properly issued.
Q23. Are we required to issue a receipt for small amounts, e.g. $10 or $20?
A23. No, this is not required. Some organizations advise donors that they will only receive receipts for donations that exceed $10 or $20. This is the organization's choice. As I said earlier, it really is your choice.
Q24. Can a receipt be dated December 31, 2009 if the cheque is dated for 2010?
A24. This cannot be done. The cheque is dated 2010, so you will deposit it in 2010. You cannot issue a receipt with a date prior to the transfer of the donation. The receipt must be issued when the donation is transferred to your organization.
Q25. Can I use the many tax receipts we have but that do not have all the examples you deem to be necessary? We foresee merging with a similar organization in the short term, which will require the preparation of new receipts. They will be prepared with all the necessary criteria.
A25. You could use your old receipts in the mean time, but I suggest that you add the missing information to the receipts by hand, since that information is truly necessary. So, you can still do it by hand in the mean time.
Q26. Known organizations, charitable funds from large companies, and private foundations ask for receipts in the cover letter with their donations. Are they entitled to one?
A26. The charity is entitled to issue or not issue a receipt. However, if you do not issue a receipt for a donation that is eligible for a tax receipt, your donors may not want to make any donations to you in the future. This is a benefit that donors want to receive, and it is in your interest to keep them happy if you want them to continue making donations to you. So, you are not required to issue receipts, but it is appreciated by donors.
Q27. If we cancel a receipt, must we advise the Canada Revenue Agency?
A27. I do not think you need to advise us personally of the cancellation of your receipt. You must obviously advise the donor that the receipt is no longer valid, strike the issued receipt off in your books and indicate that it is cancelled. You do not need to advise the Agency, but you must retain the cancellation in your records for consultation in case an audit is ever performed.
Q28. Donors who give gifts in kind would like to know the benefits of a receipt for a gift in kind. Do they receive the same deduction as for a receipt for a cash donation?
A28. Yes indeed, in effect. For instance, if a donor donates furniture with a fair market value of $100 and you issue a receipt for $100, the deduction will be the same on the donor's income tax return, and the percentage applied against the income tax will be same, whether the donation was in kind or in cash.
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