The Concept of a Gift/Don
Comparative Study - Civil Law
Common Law - Tax Law

by Joseph Sirois, LL.D.
Department of Justice Canada


The notion of gift/don is very important in tax law. The Income Tax Act[2] allows a taxpayer who makes a gift to claim a tax credit or deduction based on the fair market value (hereinafter “FMV”) of the property given. This benefit is an advantage granted by the government to encourage Canadians to show their generosity. The government foregoes revenues, subject to certain conditions, in order to encourage charitable and other activities, such as amateur sport.

The Income Tax Act contains a set of provisions that grant certain benefits, such as income tax credits and deductions, to individuals (s. 118.1 ITA) and corporations (s. 110.1 ITA) who donate to qualified donees under the Act.[3]

Such provisions, enacted by Parliament to compensate taxpayer generosity, are based on the public law concept of charity. The goal of the private law rules that concern charity in both private law systems is the regulation of the means or the vehicles by which property is transferred, whether by legacy, gift or trust, for charitable purposes. Tax law borrows only the private law criteria that are needed for the registration of charities for the purposes of controlling the financing of charities. Hence, tax law does not concern itself with the means used to effect donations to these organizations.

In this field, public law relies on private law rules to give concrete expression to charity through gift/don. If charity is to materialize under the Income Tax Act, there must be a valid gift/don according to private law in order for the provisions of the Income Tax Act on charity to apply.

Thus, when a federal statute uses a private law concept such as that of a gift/don, it may be necessary to turn to the province's private law to apply the federal enactment. Tax law frequently turns to private law to fulfil its purpose:

In my opinion fiscal law is an accessory system, which applies only to the effects produced by contracts. Once the nature of the contracts is determined by the civil law, the Income Tax Act comes into effect, but only then, to place fiscal consequences on those contracts. Without a contract, without a law and an obligation, there can be no fiscal levy. Application of the Income Tax Act is subject to a civil determination, whether such a determination be according to civil or common law.[4]

Thus, in applying federal legislation involving private law concepts one often has to turn to provincial private law. This is what section 8.1 of the Interpretation Act[5] indicates:

8.1 Both the common law and the civil law are equally authoritative and recognized sources of the law of property and civil rights in Canada and, unless otherwise provided by law, if in interpreting an enactment it is necessary to refer to a province's rules, principles or concepts forming part of the law of property and civil rights, reference must be made to the rules, principles and concepts in force in the province at the time the enactment is being applied.

 If a federal text uses a term without defining it, and if this term implicitly refers to the private law of a province, the private law rules applicable to the institution targeted by the term shall complement the federal law. The rule applies unless otherwise provided by federal law.[6]

The Income Tax Act contains no definition of the terms “gift”/don. One must therefore resort to provincial private law, as it is interpreted and applied through the case law which was embodied by the tax authorities in a “definition” of gift/don for tax purposes. Strangely, tax case law applied a civil law rule across the country, but it also applied a common law rule in Quebec. Thus, a comparative study will help situate the notion of gift/don in the ITA on the basis of the common law and civil law concepts of gift.

Such a study will be based on the approach taken in St-Hilaire, which involves determining whether the civil rights of taxpayers are in dispute and have not been defined in federal law, or whether this is a matter of public law governing the relations between taxpayers and the Crown:

What, in my view, should determine whether or not it is necessary to resort to the private law (in Quebec, the civil law) is not the public or private nature of the federal enactment at issue but the fact, quite simply, that the federal enactment in a given case must be applied to situations or relationships that it has not defined and that cannot be defined other than in terms of the persons affected. In some ways the circle is closed and we come back to the point of departure, in section VIII of The Quebec Act, 1774: when these affected persons are litigants and their civil rights are in dispute and have not been defined by Parliament, it is the private law of the province that fills the void. In short, the civil law applies in Quebec to any federal legislation that does not exclude it.[7]

Therefore, a first part will be dedicated to civil law rules that apply to donations and gifts used in the Income Tax Act. This part will be followed by a description of the rules applicable to gifts/dons under common law, in particular gifts inter vivos and donatio mortis causa. The study will focus on gifts that are applicable in connection with qualifying gifts under the Income Tax Act. Thus, since under civil law, gifts mortis causa are only possible under a marriage contract, these will be dealt with more succinctly than common law donatio mortis causa, which can be made to a qualified donee under the Income Tax Act.

A gift/don under the two legal systems will be the subject of a comparison designed to show the similarities and differences between them. This will be followed by an overview of the concept of a gift/don under tax law, as seen and set out by the courts and applied by the tax authorities. This study will be accompanied by a comparison of private and tax law. These comparisons will highlight the differences between the concepts of a gift/don under the different systems, in particular the private law system and the tax system.


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