Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the CRA.
Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle de l'ARC.
Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the Department.
Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle du ministère.
Principal Issues:
Calculation of the gain on a proposed gift by an individual of a coin collection to the Crown. The coins were accumulated over a period of over 80 years.
Position TAKEN:
1. General comments provided on subsections 46(1) and 46(3), and on what constitutes a set for purposes of subsection 46(3).
2. Based on certain assumptions as to the values of the coins (i.e., that they have increased in value and, in addition, that, for the coins acquired before 1972, their FMV at the time of the gift will be greater than their V-Day value, and that the V-Day value is greater than their actual cost to the donor), if it is established that all of the coins in the above-described situation constitute one set, such that subsection 46(3) of the Act deems the set to be one single personal-use property, the donor's adjusted cost base of this property, would generally be equal to the sum of:
(a) the total of the V-Day values of the coins included in the set, and which were owned by the donor on December 31, 1971;
plus,
(b) the total of the adjusted cost bases to the donor, immediately before the gift, of the coins included in the set, and which where acquired by the donor after December 31, 1971.
This sum would then be compared to the $1,000 amount in subsection 46(1).
Reasons FOR POSITION TAKEN:
1. We were not provided with any information on the coins to be donated.
2. Certain coins were acquired before 1972, while others after 1971. Accordingly, if subsection 46(3) applies, the set is deemed to be one property, part of which will have been acquired before 1972 and part after 1971. The ITARs may provide an inequitable result where part of a property was acquired before 1971 and part after 1972 - see position taken in files 942959, EC2623, 951010 and in IT-217R. The above-position provides relief in these instances.
XXXXXXXXXX 5-991802
M. Azzi
Attention: XXXXXXXXXX
November 18, 1999
Dear Sirs:
Re: Gift of Coin Collection to the Crown
This is in reply to your letter of June 8, 1999, regarding the calculation of the gain resulting from a proposed gift to the Crown in right of XXXXXXXXXX.
We understand that an individual has offered to make a gift, to the XXXXXXXXXX (the "Museum"), of a large historically significant coin collection which the individual accumulated over a period of over 80 years. You indicate that most of the coins appraise individually at less than $1,000; however, the collection as a whole may have a fair market value of several hundreds of thousands of dollars. You enquire whether the gain resulting from the gift will be calculated on individual coins or on the coins as a set. Should the collection be considered a set, you then question how the cost to the donor of the set would be established, given that it was acquired over a period of 80 years. In this regard, we assume that your concern is with the fact that certain coins were acquired by the donor before 1972; that is, before the application of the capital gains rules, while other coins where acquired after 1971.
Written confirmation of the tax implications inherent in particular transactions is given by this directorate only where the transactions are proposed and are the subject matter of an advance ruling request submitted in the manner set out in Information Circular 70-6R3, dated December 30, 1996 (copy enclosed). Where the particular transactions are completed, the enquiry should be addressed to the relevant tax services office. However, we are prepared to offer the following general comments. It should also be noted that for purposes of this reply, we assume that gifts to the Museum qualify as gifts to the Crown in right of XXXXXXXXXX (see the enclosed copy of Interpretation Bulletin IT-297R2 for further information on gifts to the Crown), and that the coins are "personal-use property" and, therefore, also "listed personal property" of the donor, as these terms are defined in section 54 of the Income Tax Act (the "Act") (see the enclosed copy of Interpretation Bulletin IT-332R, for further information on these terms). Finally, we also assume that the fair market value ("FMV") of each coin at the time of the gift will be greater than its actual cost to the donor (i.e., that the coins have increased in value) and, in addition, that, for the coins acquired before 1972, their fair market value ("FMV") at the time of the gift will be greater than their FMV on December 31, 1971 (hereinafter the December 31, 1971 FMV is referred to as the "V-Day value"), and that the V-Day value is greater than their actual cost to the donor.
Generally, when property is disposed of by a taxpayer to any person by way of gift inter vivos, the taxpayer is deemed to have received proceeds of disposition equal to the FMV of the property, pursuant to paragraph 69(1)(b) of the Act. Where the property disposed of is listed personal property, in calculating any resulting gain or loss, reference must be made to subsection 46(1) of the Act. Generally, under subsection 46(1) of the Act, if the adjusted cost base otherwise determined of a personal-use property immediately before its disposition is less than $1000, it is deemed to be $1,000. Similarly, if the proceeds of disposition are less than $1,000, they are deemed to be $1,000. Thus a reportable gain from the disposition of a listed personal property (or any other personal-use property) can only occur only if the proceeds of disposition are more than $1,000.
Where a number of personal-use properties, which would ordinarily be disposed of as a set, are disposed of to one person, subsection 46(3) of the Act will generally apply to deem the properties to be a single personal-use property. As a result, where subsection 46(3) of the Act applies, the $1,000 rule in subsection 46(1) of the Act (explained above) will not apply to each property in the set; but rather to the whole set as one property.
As indicated in paragraph 14 of IT-332R, the term "set" is not defined in the Act and therefore carries its ordinary meaning in the context in which it is used. The Canada Customs and Revenue Agency (the "CCRA") considers that a set for these purposes is a number of properties belonging together and relating to each other. For example, in the case of the hobby of philately, the CCRA considers that a set is a number of stamps which were produced and issued by one country simultaneously or over a short period of time. The fact that the value of a number of properties, if sold together, exceeds the aggregate of their values, if sold individually, may indicate the existence of a set. However, this is not in itself a decisive factor. The determination of whether a set exists is therefore a question of fact, and we have not been provided with any information on the coins to be donated to the Museum, in order to establish whether they form part of a set.
If it is established that all of the coins in the above-described situation constitute one set, such that subsection 46(3) of the Act deems the set to be one single personal-use property, the donor's adjusted cost base of this property (considering the above assumptions as to the values), would generally be equal to the sum of:
(a) the total of the V-Day values of the coins included in the set, and which were owned by the donor on December 31, 1971;
plus,
(b) the total of the adjusted cost bases to the donor, immediately before the gift, of the coins included in the set, and which where acquired by the donor after December 31, 1971.
This sum would then be compared to the $1,000 amount in subsection 46(1) of the Act. Assuming that this sum exceeds $1,000, it would therefore be the adjusted cost base to be used by the donor in calculating the gain resulting from the gift.
Finally, we would also note that while, as explained above, a gift generally results in a disposition of the property at FMV, subsection 118.1(6) of the Act provides for a designation pursuant to which a donor may, in certain instances, essentially elect to reduce both the amount at which the property is disposed of, and his or her charitable tax credit. We have enclosed a copy of IT-288R2 for additional information on the designation provided under subsection 118.1(6) of the Act.
We trust that these comments will be of assistance.
Yours truly,
Jim Wilson
for Director
Business and Publications Division
Income Tax Rulings and
Interpretations Directorate
Policy and Legislation Branch
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