Gifts in Kind

A REVIEW

While a gift in kind, such as real estate, art, antiques, is similar to a gift, there are some differences.

The donor receives a donation receipt for the value of the property donated which receipt can be used to reduce income tax in the year the donation is made and the subsequent five taxation years. However:

  1. Any gain that the donor realizes is ordinarily subject to income tax in his hands in the year the donation is made;
  2. An appropriate valuation of the assets being donated may be required.

The church obtains immediate use and ownership of the donated asset and it may retain or sell the particular asset.  Any amount received by the church, which is above or below the value determined for purposes of the donation receipt, does not adjust the donation receipt amount.

Example:

Donation of property with a $10,000 value and a cost of $6,000 to the donor, resulting in a $4,000 capital gain

Donation:
$10,000
Federal & P.E.I. tax credits:
$4,528
Tax on capital gain:
$914*
Net income tax reduction: $3,614

NOTE: There would be $914 of tax payable on the disposal of the property irrespective of the donation.

*Based on top marginal tax bracket