The Concept of a Gift/Don
Comparative Study - Civil Law
Common Law - Tax Law
4. Tax law and interaction with private law
In this part, the tax law discussion of gift/don will be followed in each section by comments and comparisons with private law.
4.1 General principles
The Income Tax Act does not contain a definition of the term gift/don which is used in connection with the measures put forward to encourage gifts to qualified donees under the Act. The definition used for purposes of the Income Tax Act can be summarized as follows:
“A gift, for purposes of sections 110.1 and 118.1, is a voluntary transfer of property without valuable consideration.”
Definitions of the term “gift” can be found in other publications issued by tax authorities, including, in particular:
“The term “gift” is not defined in the Act and therefore has the meaning established at common law - which is a voluntary transfer of property without consideration or expectation of return or compensation.”
Private law and tax law share common elements in terms of the definition of a gift/don with regards to the transfer of property by a donor to a donee without consideration or benefit to the donor. Therefore, there is no doubt that a gift/don under the Income Tax Act is based on rules of Canadian private law, especially those of common law. The tax authorities themselves recognize this.
On the other hand, a gift/don in tax law includes gifts by trust and gifts by will. In common law, as long as the required conditions for a gift are met, there will be a gift/don, no matter which the instrument is used; a gift by trust (donation fiduciaire) and a gift by will (donation testamentaire) will be perfectly valid as long as the basic conditions are met.
Whereas a gift/don was associated with a will in the Civil Code of Lower Canada, it is now a specific nominate contract mentioned in the Civil Code of Québec. Under the Civil Code of Lower Canada, a trust could only be created through a gift or a will; the Civil Code of Québec requires the constitution of a trust patrimony and the simple transfer of property to this patrimony constituted as a trust, followed by the trustee's acceptance. It does not flow that the term gift/don includes trusts and wills under the Civil Code of Québec since it focuses on the nominate contract called “gift/donation”, which is synonymous to gift/don. In such a case, only the nominate contract in the Civil Code of Québec would be covered under the Income Tax Act in civil law and the application of the tax rules pertaining to gifts would be limited to gifts inter vivos under Quebec's private law.
Tax authorities require that the property that is the object of the gift be of more than mere nominal value in order to be recognized as a gift. Used clothing of little value would not qualify as a gift in kind. Such a gift would still be a gift in private law, but would not qualify for tax purposes.
As well, in order for the gift to qualify for a tax credit or deduction, the donee must be a qualified donee that issues official tax receipts for gifts. While this may be obvious, it nonetheless limits the scope of the term gift/don for tax purposes since qualified donees are limited by the Income Tax Act. While in private law a gift can be made to anyone, the Income Tax Act specifies the donees that will qualify for tax deduction and tax credit purposes.
Gifts of ecologically sensitive property and cultural gifts that are the subject of special rules under both federal and provincial laws will not be dealt with in this document.
4.2 Tax deduction and tax credit: considerations allowed under tax law
The first element distinguishing a gift under tax law from a one under private law pertains to the requirement that the donor not receive any consideration for the gift he or she has made. The transfer of property to a donee may result in the donor receiving a consideration in the form of an official tax receipt which can be used for a deduction in the case of a corporation (sec. 110.1 ITA) or a tax credit in the case of an individual (sec. 118.1 ITA). Linden J. expressed it as follows in Friedberg:
Thus, a gift is a voluntary transfer of property owned by a donor to a donee, in return for which no benefit or consideration flows to the donor (see Heald, J. in The Queen v. Zandstra [1974 DTC 6416]  2 F.C. 254, at p. 261.) The tax advantage which is received from gifts is not normally considered a “benefit” within this definition, for to do so would render the charitable donations deductions unavailable to many donors.
The Federal Court of Appeal subsequently confirmed this rule:
The Tax Court of Canada judge applied to the transactions in question the rules in the Civil Code of Lower Canada which at the time governed the making of gifts, and in particular arts. 755 and 776. He concluded that the conditions necessary for a gift to exist, namely the intention to give, delivery of the property and acceptance by the donee, had been met. Applying Friedberg v. R. (1991), 92 D.T.C. 6031 (Fed. C.A.), a judgment of this Court, he found that even though the respondents' primary motivation in the case at bar was to obtain a tax benefit, that did not nullify the donor's intent to give. He was also of the opinion that obtaining a receipt from the recipient organization could not be regarded as consideration that eliminated the gratuitous and liberal nature of the transaction.
From the first quote stands for the proposition that obtaining a benefit could invalidate the gift in private law if this benefit is not specifically authorized and approved under the Income Tax Act.
Secondly, if a gift is valid in private law, it can then be considered under the Income Tax Act for the purpose of obtaining a tax credit or deduction, as long as it meets the requirements of the Income Tax Act. The gift has to be recognized as being valid in private law before it can be considered under the Income Tax Act; therefore, tax law relies on private law in the application of its rules on gifts.
The Income Tax Act grants a tax benefit for a gift to a qualified donee who has issued an official tax receipt, which represents a significant difference from private law. On the other hand, the tax deduction and credit are essential to encouraging taxpayers to support qualified donees through their gifts; this principle has been recognized in the case law.
Aside from this, for tax law purposes, a gift involves a transfer of property by one person to a qualified donee who issues a receipt that can be used for a tax deduction or credit without any consideration other than the tax benefit. On the other hand, if the sole goal of the gift is to obtain a tax benefit and the gift is but a mere front for obtaining that benefit and none of the basic conditions of private law are met, the gift will not be eligible since the tax benefit then becomes a consideration.
4.3 Consideration under the ita
In terms of religious education, the sum spent by a parent to ensure that a child receives a religious education because he or she feels morally obliged to provide it, even absent any legal obligation to do so, will not be deemed an eligible gift even if the institution is duly registered. 
As well, the disbursement of gifts to an amateur sport association by a father whose daughter benefits from the training program under the aegis of this association has been deemed not to be a gift since the benefits obtained by the donor constitute a consideration in return for which the father has disbursed money.
This having been said, the tax authorities have determined which gifts they consider eligible under the Income Tax Act.
4.4 Consideration that differs from the value of a property or certain services
The purchase of a ticket for a dinner, ball, concert, performance or similar event at a price that is greater than the market value of the food or services provided to the buyer of the ticket may lead to the issuance of a receipt for the difference between the price of the ticket and this market value. In such cases, the payment is deemed to be comprised of two considerations: one for the value of the ticket and the other as a gift to the organization:
“Without a doubt, in the contribution made there is a twofold consideration: one subscription was made for charitable purposes and the other for entertainment purposes.”
The rule is that the property or service must be consumed and not be subject to the possibility of being resold. This would explain why a dinner involving an auction, a draw or a lottery would not amount to a gift unless the value of the property sold or the proposed prizes were less than the nominal value.
In practice and relying on case law, a gift for an amount in excess of the value of a dinner, ball, concert, performance or similar event will be accepted for income tax purposes. This practice is consistent with civil law but it is not consistent with the common law since the transaction would be deemed to be one and the same transaction. It is interesting to note that this principle, which is applied across the country, comes from the Aspinall case which originated in Quebec. This raises the question of whether as a consequence of the adoption of section 8.1 of the Interpretation Act such a rule will need to be codified so as to be applicable in common law provinces.
With regard to the purchase of non consumable property or property that could be resold by the “donor”, it would be necessary to ensure that the gift and purchase are separate operations without any connection between the two. Thus, if the purchase cannot be made unless accompanied by a charitable contribution, there will be no gift since the transaction will be deemed to be a single operation containing a consideration. Allan S.W. Tite and Hudson Bay Mining issue from common law provinces, just like Gaudin, which is from British Columbia. The same rule applies in the case of a sale of property to a qualified donee for a value that is less than the market value; the difference between the price paid and this value cannot be deemed a gift since the transaction cannot be “divided”. If these same situations occurred in Quebec, they would constitute gifts for the difference between the market value of the property given and the consideration. Will these gifts be recognized as such under section 8.1 of the Interpretation Act?
If there is a consideration in a deed such as a sale, such consideration would eliminate the possibility that the transaction be considered a sale and a gift since a gift is only valid in the absence of any consideration; also the difference between the price paid and the value of the property does not constitute property that could be the subject of a transfer for tax purposes:
A contract of sale, which is, by definition, a transfer of property for a consideration, cannot be a gift, which is, by definition, a disposition of property without consideration.[...] While speaking loosely, one might say that a gift was made by way of sale at an underevaluation (the gift being the benefit so conferred), in my view, the word gift in a taxing statute must be taken as referring to what is known to the law as a gift, namely, the gratuitous transfer of property, and the difference between value and price is not 'property' and is not something that can be transferred.
The purchase and the gift must be completely separate and must constitute two distinct transactions for the gift to be qualified for tax purposes. The same logic would apply to a ticket for a draw or lottery; if the purchase of the ticket and the charitable contribution represent two independent transactions, the latter may be considered to qualify as a gift.
Will not be a gift for purposes of the Income Tax Act the renunciation or gift by a person of the difference between the value of the property and the consideration paid in cases where the former exceeds the latter or is lower then the latter. Such a gift is rejected under the common law rule in the case of non-consumable property, but it would be valid in civil law. This principle also applies across the country, in spite of the different rules of law in the common law and civil law jurisdictions. Will the application of rules of civil law in common law jurisdictions and the non-application of a civil law rule in Quebec have to be codified in the context of the Income Tax Act in order to avoid the rejection of such an application by operation of section 8.1 of the Interpretation Act?
There are also cases where a qualified charity has the right to issue annuities and an individual may pay for the issuance of such an annuity an amount that exceeds the total amount that will be paid to him or her in annuities. The tax authorities allow the difference between these two amounts to be treated as a gift under the Income Tax Act and the issuance of a receipt for a gift. This is an extension of the transfer of property without consideration, but it is a single transaction that would not otherwise lead to an eligible gift, as in the case of a sale of non-consumable property.
The possibility of obtaining an annuity that would add up to a sum lower than that which was paid to the taxpayer as annuities and obtaining a tax benefit for a gift for the surplus amount is equivalent to the purchase of property for a sum in excess of its value. This type of gift, allowed under the rules of civil law, is not a gift/don in common law, since the payment of the annuity represents a consideration.
4.5 Contribution of services
The contribution of services may not be the subject of an eligible gift since it does not involve the transfer of property. However if the services are charged to the registered charity and then payment is voluntarily forgiven in its favour, this gift of the value of the services may lead to the issuance of a receipt for a gift; thus, there is a transfer of property since the amount paid for the services is given back to the organization.
Even if there is also a prohibition against making a gift of services, another means, that of billing for these services and repaying of the value of these services to the qualified donee, achieves the same result. The services are transformed into a claim, the payment of which, being a sum of money that is a property that could be the subject of a gift, is returned to the donee. The services are liquidated so they can be transformed into property that can be given under the rules of private law.
4.6 Capital of a trust and life interest
Residual interest in real property and equitable interest in a trust may qualify as gifts for tax purposes. These types of gifts are closely linked to life interest and trusts in common law and their terms and conditions are based on the specific features of these institutions. It is difficult to find similarities with civil law institutions, given the absence of any institutions resembling the common law interest and given a concept of fiducie that is different from that of trusts. Tax authorities do not all agree on the possibility of using equivalent civil law institutions in Quebec to make valid gifts under the Income Tax Act.
Furthermore, since under civil law a trust is a patrimony by appropriation without a holder, there is no place for the concepts of legal and beneficial ownership, which are required under the Income Tax Act to make a gratuitous gift through a trust.
We will not be able to address in civil law gifts of a residual interest in real property or an equitable interest in a trust that originate directly from common law. The use of these tax instruments under civil law is difficult, if not impossible, because of the differences between civil law and common law with respect to concepts of property.
One could be forgiven for wondering whether the harmonization of the concept of a gift/trust must necessarily entail equivalent possibilities for Quebec taxpayers. If so, would it be possible to translate these fundamental common law concepts into civil law terms?
4.7 Gift of a life insurance policy
Tax authorities allow for the gift of a life insurance policy to a qualified donee by an individual inasmuch as this is done through the latter's will, or if the life insurance policy is transferred to the donee and the latter is listed as an official beneficiary under the policy. The payment of premiums by the donor on this policy, which is the property of the qualified donee is also deemed a gift. Such operations involve a transfer of property (insurance policy or payment of premiums) without consideration and the voluntary transfer of a property-the life insurance policy-to a qualified donee. But it could be argued that the payment of premiums directly to the life insurance company rather than to a qualified donee, even with the latter's consent, would not constitute a gift under private law since the property is not being transferred to the donee but rather to a third party. Furthermore, there is a consideration in terms of the insurance coverage.
Tax practice, while based on the fundamental rules of private law, have influenced the concept of a gift/don according to the benefits that the tax authorities, relying occasionally on the case law, grant to taxpayers. The gift/don under the Income Tax Act seems to take its distance from provincial private law. A tax benefit is an exception to the general principle of the Income Tax Act and should be interpreted accordingly.
Thus, it is in light of the Income Tax Act that the conditions, which will assure the validity of a gift/don, should be considered in terms of granting a tax benefit. Yet, it is the private law rules that set the foundations for gifts/dons in federal tax law.
Since some of the measures that are adopted and recognized in tax matters are not always supported by the applicable private law, should the Income Tax Act be harmonized to take these disparities into account and thereby ensure that the tax treatment of a gift/don is similar for all taxpayers? Should the tax rules be codified to enable the application of the rules of private law between the systems in order to achieve this goal?
 CANADA CUSTOMS AND REVENUE AGENCY, Interpretation Bulletin IT-110R3, “Gifts and Official Donation Receipts”, June 20th, 1997, para. 3. The origins of this definition can be traced back to Zandstra, supra note 58, which studied Black's Law Dictionary and the Shorter Oxford Dictionary as well as the decision of Owen J. in Commissioner of Taxation, supra note 58. See also: Marc JOLIN, Canada Tax Words, Phrases & Rules- Dictionnaire fiscal canadien, Toronto, Carswell, 1999; Diane BRUNEAU, “Les différentes manières de donner”, in Colloque - Les dons planifiés, 71, Montréal, Association de planification fiscale et financière, 2000 at 89.
 This definition is mentioned in the third paragraph of the information letter appended to Information Circular IC 75-23 “Tuition Fees and Charitable Donations Paid to Privately Supported Secular and Religious Schools”, September 29, 1975, still in force.
 S. 118.1(4) ITA. CANADA CUSTOMS AND REVENUE AGENCY,Interpretation Bulletin IT-226R, “Gifts to a charity of a residual interest in real property or an equitable interest in a trust”, November 29th, 1991.
 Art. 981a C.C.L.C.
 Art. 1260 C.C.Q. Jacques BEAULNE, op. cit. note 50, paras. 146-149 at 91-98. There is even some doubt raised about the creation of a trust by gift or will: John E.C. BRIERLEY, loc. cit. note 53 at 234-242.
 CANADA CUSTOMS AND REVENUE AGENCY, Interpretation Bulletin IT-297R2, “Gifts in Kind to Charity and Others”, March 21st, 1990, para. 6.
 S. 110.1(1), 110.1(2), 118.1(1) and 118.1(2) ITA.
 The Queen v. Friedberg, 92 D.T.C. 6031 (Federal Court of Appeal - Application for leave to appeal to the Supreme Court refused) (hereinafter “Friedberg”). See also: D. BRUNEAU, loc. cit. note 91 at 91.
 The Queen v. François Langlois, 2000 D.T.C. 6612 (Federal Court of Appeal). See also The Queen v. Louise Marcoux-Côté and Alain Côté, 2000 D.T.C. 6615 and The Queen v. Diane L. Duguay and Amédée Duguay, 2000 D.T.C. 6620 (Federal Court of Appeal).
 Friedberg, supra note 98.
 S. 110.1(2) and 118.1(2) ITA.. In order to be included in the total of gifts, there has to be a receipt providing evidence.
 Dutil v. The Queen, 85 D.T.C. 281 (Tax Court of Canada).
 McBurney, supra note 60; Zandstra, supra note 58; No. 688 v. M.N.R., 60 D.T.C. 130 (Tax Appeal Board). See also: Woolner v. Attorney General of Canada et Al., 99 D.T.C. 5722 (Federal Court of Appeal). Yet these decisions, especially the more recent ones, seem to contradict Information Circular IC 75-23, op. cit. note 92, which allows for the payment of a sum of money to a religious teaching institution to qualify as a gift. Similarly: D. BRUNEAU, loc.cit. note 91 at 90-91. Ms. Bruneau discusses a decision from the Province of Quebec on provincial law(Heisler v. S.M.R.Q.,  R.D.F.Q. 193), which agrees with the above-mentioned decisions.
 Burns, supra note 60. See also: D, BRUNEAU, ibid. at 91.
 See the publications indicated in paragraph 23 of the following interpretation bulletin: CANADA CUSTOMS AND REVENUE AGENCY, op. cit. note 91. This bulletin contains general rules applicable to gifts that could lead to the issuance of official donation receipts.
 Aspinall v. M.N.R., 70 D.T.C. 1669 (Tax Appeal Board) (hereinafter “Aspinall”). See also: CANADA CUSTOMS AND REVENUE AGENCY, ibid., paras. 5 to 8.
 CANADA CUSTOMS AND REVENUE AGENCY, ibid., paras. 5 to 8 11 and 12.
Aspinall, supra note 106, focuses on events that took place in Montréal.
 Allan W. S. Tite, supra note 86. See also: CANADA CUSTOMS AND REVENUE AGENCY, op. cit. note 91, para. 13. In Hudson Bay Mining, supra note 60, it was decided that the sale of a hydroelectric network in consideration for a sum of $3,375,000, $750,000 of which was paid to the Hudson Bay Co. and the balance of which was the subject of a receipt for an official donation from the Province of Manitoba, did not give rise to an eligible gift since the “gift” and the sale were one and the same transaction including a consideration: D. BRUNEAU, loc. cit. note 91 at 94.
 Gaudin v. M.N.R., 55 D.T.C. 385 (Tax Appeal Board) (hereinafter “Gaudin”). This was the decision in Gervais, supra note 90, which, while recognizing this type of gift as being valid in civil law, refused its application in tax law because of the uniformity of application of the tax rule in Canada; same in Littler, supra note 90. See also: D. BRUNEAU, op. cit note 91 at 93-94.
 Littler, ibid. at 6181-6182, used in Gervais, ibid. at 5007-5008.
 CANADA CUSTOMS AND REVENUE AGENCY,op. cit note 91, para. 14.
 Ibid., para. 15(c).
 Allan S.W. Tite, supra note 86, Hudson Bay Mining, supra note 60 and Gaudin, supra note 110, come from common law jurisdictions.
 REVENUE CANADA, Interpretation Bulletin IT-111R2, “Annuities Purchased from Charitable Organizations”, September 22nd, 1995.
 Slobodrian v. The Queen, 98 D.T.C. 3414 (Tax Court of Canada).
 CANADA CUSTOMS AND REVENUE AGENCY, op. cit. note 91, 15(d). However, pursuant to Quebec law, the issuance of an official donation receipt upon presentation of the receipts of expenses for the transportation of youth by volunteers constitutes a consideration and this transaction is not recognized as a gift: L'Écuyer v. S.M.R.Q., (Court of Québec - Civil Division), file no. 760-32-003895-986, December 1st, 2000.
 CANADA CUSTOMS AND REVENUE AGENCY, op. cit. note 93.
 “Table ronde sur la fiscalité fédérale”, in Congrès 98, (Montréal, Association de planification fiscale et financière, 1999), Question 1 at 43:57.
 CANADA CUSTOMS AND REVENUE AGENCY, Interpretation Bulletin IT-244R3, “Gifts by Individuals of Life Insurance Policies as Charitable Donations”, September 6 th , 1991.
 REVENUE CANADA, ibid.
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