Deemed fair market value rule

On this webpage, receipt refers to an official donation receipt.

What is deemed fair market value?

The deemed fair market value rule states that, under certain conditions, a receipt issued for a non-cash gift must be issued for the lesser of the gift's fair market value and its cost to the donor (or in the case of capital property, its adjusted cost base) immediately before the gift is made. The conditions are as follows:

Examples  

Example 1
A donor purchases a work of art for $300, and six months later donates the work to a registered charity. Prior to gifting the art, the donor has the work appraised at a value of $1,000.

Because the donor is gifting the art within three years of purchasing it, if the charity issues a receipt for the gift, it must be for the lesser of its fair market value and its cost to the donor immediately before the gift was made. In this example the amount of the receipt should be $300.

Example 2
A donor receives jewellery valued at $1,500 through an inheritance. Two years later, she donates the jewellery to a registered charity. Prior to gifting the jewellery, the donor has it appraised at a value of $2,000.

Because the donor is gifting the jewellery within three years of receiving it, if the charity issues a receipt for the jewellery, it must be for the lesser of its fair market value and its cost to the donor immediately before the gift was made. In this example, the cost to the donor is deemed to be the fair market value of $1,500 at the time she received the jewellery. Therefore, the amount of the receipt should be $1,500.   

Note

If a donor makes a non-cash donation to a charity, for which a receipt is issued, and fails to notify the charity that the non-cash gift is subject to the deemed fair market value rule, the value of that donor's gift could be reduced to nil.

Gifts exempt from the deemed fair market value rule (normally assessed at fair market value):

If the registered charity is not a private foundation, the following property is also exempt:

References

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