On July 31, 2017, the Canada Revenue Agency released two new videos from its gifting and receipting video series.
The first video provides registered charities with guidance on the rules for issuing donation receipts at auctions. Specifically, the video offers an example of a five course dinner gifted to the charity by a hobby chef and addresses whether an official donation receipt can be provided to the donor. Whether it can be provided is dependent on whether the fair market value of the gift can be determined. In the example, an official donation receipt could not be issued because the fair market value of the hobby chef’s time, skill, and effort could not be determined. However, an official donation receipt can be issued for the fair market value of the ingredients because the ingredients are viewed as property, and property can be gifted. If the chef were in the business of selling similar items in the open and unrestricted market, then the charity could have issued an official donation receipt for the chef’s time, skill, and effort.
The second video provides registered charities with guidance on how to calculate donor advantage and the 80% rule to winning bidders at auctions. An advantage is the total value, at the time the gift is made, of all benefits that a person is entitled to receive in relation to the gift. An advantage also applies at auctions. For example, if an auction item has a fair market value of $100, then the winning bidder’s advantage is $100. If the value of advantage to the winning bidder is 80% or less of the fair market value, then the 80% rule to winning bidders at auctions applies and an official donation receipt can be issued for the difference. A simple way to apply the 80% rule is to multiply the fair market value of the auction item by 1.25. For example, if the fair market value of the auction item is $100 and the winning bid is $125 or more, then an official donation receipt can be issued for an amount equal to the difference between $125 and the winning bid. However, it is important to note that an official donation receipt cannot be issued if the fair market value of the auction item is not displayed before the auction begins. In such a case, the bidders will not know if they are voluntarily making a gift by bidding higher than the fair market value.
The CRA videos can be viewed here.