Limitations on claim amount of gift

The amount of the gift(s) that may be claimed on the deceased's final return for purposes of the tax credit must be the lesser of:

  • the eligible amount of the gift(s), made in the year of death (this may include gifts made by a GRE or a former GRE), plus the unclaimed portion of the eligible amount of any gifts made in the 5 years before the year of death
  • 100% of the deceased's net income on line 23600 on the return

For a gift of property made to a qualified donee, special rules may apply to limit the fair market value (FMV) of the property gifted, which limits the eligible amount of the gift that can be used in computing the donation tax credit amount. When the rules apply, the FMV of the donated property will be deemed to be the lesser of the property's:

  • FMV otherwise determined
  • cost (or its adjusted cost base (ACB) if it is capital property), at the time the gift was made

The limitation on the eligible amount of a gift will apply where:

  • the donated property was acquired as part of a gifting arrangement that is a tax shelter
  • the property is being gifted otherwise than as a consequence of the taxpayer's death, and the property was acquired less than 3 years, or in some cases, less than 10 years, before making the gift

The limitation on the eligible amount of a gift will not apply to gifts of any of the following:

  • inventory
  • real property or an immovable property located in Canada 
  • certified cultural property (unless it was gifted after February 10, 2014, and was acquired as part of a gifting arrangement that is a tax shelter)
  • ecologically sensitive land including a covenant, an easement, or in the case of land in Quebec, a real servitude (or for gifts made after March 21, 2017, a personal servitude when certain conditions are met)
  • a share, debt obligation, or right listed on a designated stock exchange
  • a share of the capital stock of a mutual fund corporation
  • a unit of a mutual fund trust
  • an interest in a related segregated fund trust
  • a prescribed debt obligation
  • shares of controlled corporations in certain circumstances
  • property acquired by a corporation in certain circumstances where the property was acquired under a tax-deferred rollover

There are also special anti-avoidance rules that may apply where a taxpayer has attempted to avoid the application of the limitation rules. For more information, see Pamphlet P113, Gifts and Income Tax.

If the property was acquired as part of a gifting arrangement that is a tax shelter, the eligible amount will be reported in box 13 of T5003 slip, Statement of Tax Shelter Information.

Sometimes, a capital property is gifted. At the time the property is gifted to a qualified donee, its FMV may be more than its ACB.

When the FMV is more than the ACB, you may designate an amount that is less than the FMV to be the proceeds of disposition. This may allow you to reduce the capital gain otherwise calculated. If you choose to designate an amount that is less than the FMV as the amount to be used as the proceeds of disposition, this amount will be used to determine the eligible amount of the donation. You can choose to designate an amount that is not greater than the FMV and not less than the greater of:

  • any advantage in respect of the gift
  • the ACB of the property (or, where the property was depreciable property, the lesser of its ACB and the undepreciated capital cost of the class of the property), at the time you made the donation

Treat the amount you choose as the proceeds of disposition when you calculate any capital gain.

For more information about charitable donations and the special rules that may apply, see Line 34900 and Pamphlet P113, Gifts and Income Tax.

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