Rules for Gifts-In-Kind

This article comes from the Canadian Council of Christian Charities September 2016 issue.

In-kind gifts are eligible for tax deductions and credits, but some rules apply as prescribed by the Tax Court of Canada. Most notably, official receipts are required, which contain the relevant information.

A registered charity that issues an official donation receipt with incorrect or incomplete information is liable to a penalty equal to 5% of the eligible amount stated on the receipt. This penalty increases to 10% for a repeat offence within five years.

In Hossein Shahbazi v Her Majesty the Queen, the TCC reaffirmed that failure to describe the property to which a tax receipt relates is a violation of receipting requirements, and is sufficient grounds to disallow a tax credit. This 2015 case concerned an appeal by Hossein Shahbazi about the disallowance of tax credits for gifts-in-kind that he made to two different charities.

The CRA took issue with the completeness of the tax receipts and not the valuation of the donations. In particular, CRA said the receipts were deficient in the following ways:

  • The date the donation was made and the date the receipt was issued were both missing.
  • The receipts did not contain a brief description of the property, as required for non-cash donations.
  • The receipts did not contain the name and address of the appraiser, which is required when the property is appraised.

What does this mean for Charities?

Charities should ensure that they comply with the proper receipting requirements. Charities must ensure that receipts provided foe gifts-in-kind, clearly shows that the gift was in property and not cash and include a description of the property. As such, charities should conform to the receipting requirements as closely as possible to avoid unhappy donors and costly penalties