Donations of Private Corporation Shares and Real Estate
Currently, taxpayers are exempt from capital gains tax for
charitable gifts of publicly listed securities and gifts of
ecologically sensitive land and cultural property. The Budget
proposes to provide an exemption from capital gains tax in respect
of certain dispositions of private corporation shares and real
estate occurring after 2016 provided the following conditions are
Cash proceeds received from the disposition are donated to a
qualified donee within 30 days after the disposition, and
The disposition was to a purchaser that deals at arm's
length with both the donor and the qualified donee.
Therefore, it will be necessary for the donor to sell the
private company shares or real estate to an arm's length
purchaser and then donate the proceeds to a qualified donee, in
order to qualify for the proposed capital gains exemption.
Where only a portion of the proceeds of disposition are donated,
the capital gains exemption will be applied proportionally.
The Budget includes anti-avoidance rules to reverse the
exemption where, within 5 years after the disposition, the donor or
a person that does not deal at arm's length with the donor:
re-acquires the property that had been sold
acquires shares substituted for shares that have been sold
those shares are redeemed and the donor does not deal at
arm's length with the corporation at that time
Donations to Foreign Charitable Foundations
Under the current legislation, only a foreign organization
carrying on certain activities can receive status as a qualified
donee, thereby allowing the donor to claim charitable donation
credits or deductions against Canadian income. The Budget
proposes to allow foreign charitable foundations to be registered
as qualified donees if they have received a gift from the Canadian
government and the foundation is carrying on disaster relief work,
urgent humanitarian aid, or other work in the national interest of
Canada. This measure will apply when the enacting legislation
receives Royal Assent.
Investments in Limited Partnerships by Registered
Currently, registered charities rarely hold an interest in a
partnership as the current rules prevent a charity from carrying on
a business. A partner is considered to carry on the business
of the partnership. The Budget proposes that, effective April
21, 2015, a registered charity shall not solely – because of
the acquisition or holding of an interest in a partnership –
be considered to carry on any business of the partnership if the
following conditions are met:
The interest is in a limited partnership;
The charity and non-arm's length entities hold 20% or less
of the interests in the limited partnership; and
The charity deals at arm's length with each general partner
of the limited partnership.
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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