For more information, see Income Tax Folio S7-F1-C1, Split-receipting and Deemed Fair Market Value. The fact that you received an advantage will not by itself disqualify the transfer from being a gift when the fair market value ( FMV) of the advantage does not exceed 80% of the FMV of the transferred property. However, a transfer of property for which you received an advantage is still considered a gift for purposes of the Income Tax Act as long as the Canada Revenue Agency (CRA) is satisfied that the transfer of property was made with the intention to make a gift. In most cases, a gift is a voluntary transfer of property without valuable consideration. If you lived in Quebec on December 31, claim your provincial tax credit on your Quebec income tax return. If you made a gift of money or other property to a qualified donee (see Gifts to registered charities and other qualified donees), you may be able to claim federal and provincial or territorial non-refundable tax credits when you file your income tax and benefit return, provided that you receive an official donation receipt from the qualified donee. whether there is de facto control of one party by the other because of, for example, advantage, authority, or influenceįor more information, see Income Tax Folio S1-F5-C1, Related Persons and Dealing at Arm's Length.whether the parties to a transaction act in concert without separate interests "acting in concert" means, for example, that parties act with considerable interdependence on a transaction of common interest.whether there is a common mind that directs the bargaining for the parties to a transaction.The following criteria will be considered to determine whether parties to a transaction are not dealing at arm’s length: Each case will depend upon its own facts. Unrelated persons – They may not be dealing with each other at arm's length at a particular time. A corporation and another person or two corporations may also be related persons. Related persons – They are not considered to deal with each other at arm’s length. Related persons include individuals connected by blood relationship, marriage, common-law partnership, or adoption (legal or in fact). For more information, see Official donation receipts and Deemed fair market value.įair market value (FMV) – This is usually the highest dollar value you can get for your property in an open and unrestricted market, between a willing buyer and a willing seller who are acting independently of each other. There are situations in which the eligible amount may be deemed to be nil. An arm’s length transaction is generally a transaction that reflects ordinary commercial dealings between unrelated parties acting in their separate interests.Įligible amount of the gift – This is the amount by which the fair market value (FMV) of the gifted property exceeds the amount of an advantage, if any, in respect of the gift. For more information on tax shelters and gifting arrangements, see Guide T4068, Guide for the Partnership Information Return (T5013 Forms).Īrm’s length – This refers to a relationship or a transaction between persons who act in their separate interests. In this case, the eligible amount of the gift will be reported in box 13 of Form T5003, Statement of Tax Shelter Information. Generally, a limited-recourse debt is one where the borrower is not at risk for the repayment. For example, there may be a limited-recourse debt that can reasonably relate to a gift to a qualified donee as part of a gifting arrangement that is a tax shelter. The advantage also includes any limited-recourse debt (including amounts owed by persons not dealing at arm's length with you) in respect of the gift at the time it was made. You are therefore considered to have received an advantage of $150. In gratitude, the company provides you with three tickets to a show that are valued at $150. The advantage may be contingent or receivable in the future, either to you, or a person or partnership not dealing at arm’s length with you.įor example, you donate $1,000 to the Anytown Ballet Company, which is a registered charity. For more information, read Chapter 3 of Guide T4037, Capital Gains.Īdvantage – This is generally the total value of any property, service, compensation, use, or any other benefit that you are entitled to as partial consideration for, in gratitude for, or in any other way related to the gift. You cannot add current expenses, such as maintenance and repair costs, to the cost base of a property. It also includes capital expenditures, such as the cost of additions and improvements to the property. Adjusted cost base (ACB) – This is usually the cost of a property plus any expenses to acquire it, such as commissions and legal fees.
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