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Charities and Giving: What is a gift?in Tax Advice Information and Updates
There are certain questions that a qualified donee (such as a registered charity) must consider to be able to determine if it received a gift. If the donation is considered a gift, the qualified donee can issue a receipt to the donor.
Here are the questions:
Was the gift made voluntarily? A gift must be given freely. If it the gift was given because of a contractual or other obligation, then a receipt cannot be issued.
Was there a transfer of property? A receipt can only be issued for a gift of property and not for a gift of service.
Did the donor receive an advantage? If a donor receives an advantage as a result of the donation (such as tickets to an event, use of property, dinner or performance at a fundraising event), all or part of the donation may no longer qualify as a gift.
Did the donor ask for the gift to be directed to a specific person, family, or other non-qualified done? A donor cannot choose a specific beneficiary for their gift or ask the qualified donee to give the gift to another non-qualified donee.
Was there a condition attached to the gift? There are 2 types of conditions attached to a gift – a condition precedent where a certain condition must be met before the gift takes effect and condition subsequent where a condition must be met after the gift is made.
In a condition precedent, a qualified donee can issue a receipt only after the condition has been met. In a condition subsequent, the donor can ask that the donation be returned if the condition is not met.
What types of transactions generally do not qualify as gifts? Transactions such as gifts of services, gift certificates that the issuer donated, non-cash gift for which the fair market value cannot be determined, gifts provided in exchange for advertising or sponsorship, payment for a lottery ticket, pledges, loan of property, admission fee to an event or program, use of a timeshare and lease of premises.
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