Lottery prizes

How to issue a receipt

A qualified donee may issue a receipt for a donation of a prize won in a lottery as follows:

Donated three or more years after it was won in the lottery

  • If a lottery prize is donated to a donee three or more years after it was won in the lottery, the donee may issue a receipt for the fair market value (FMV) of the gift at the time of donation.

Donated less than three years after it was won in the lottery

  • If a lottery prize is donated to a donee less than three years after it was won in the lottery, the deemed fair market value rule applies. Under the deemed fair market value rule, the donee may issue a receipt only for the lesser of:

    • the gift’s FMV at the time of donation

    • its cost to the donor (the cost to the donor is equal to the FMV of the prize when it was won in the lottery)

Example

A donor wins a lottery prize of jewellery valued at $1,000, and later donates the jewellery to a charity. Before gifting the jewellery, the donor has it appraised at $1,250. The charity would like to issue a receipt to the donor.

  • FMV at time of donation                                                            $1,250

  • FMV when donor won prize                                                       $1,000

  • Cost to donor (FMV when donor won prize)                              $1,000

If the donor donates the jewellery three or more years after it was won in the lottery, the charity can issue a receipt for the FMV at the time of donation ($1,250).

If the donor donates the jewellery within three years, the charity can issue a receipt for $1,000 which is the lesser of the FMV at the time of donation ($1,250) and the cost to the donor ($1,000).

If the donor receives an advantage (for example, a meal or tickets to a show) in return for the donation, split receipting rules apply.

Note

If a donor makes a gift in kind (non-cash) donation to a donee and receives a donation receipt, but does not tell the donee that the deemed fair market value rule applies, the eligible amount of the donor's gift could be reduced to nil.

References

  • Income Tax Act, R.S.C. 1985 (5th supp.) c. 1, ss. 52(4) 
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