Gifts to U.S. Charities and the Availability of Charitable Tax Credits – An Unusual Situation

September 30, 2011 | Rahul Sharma

The Canada Revenue Agency recently released a technical interpretation with respect to an interesting and somewhat unusual fact scenario. Both the circumstances and CRA’s comments reinforce the need to carefully plan testamentary gift giving and review the availability of tax credits when gifts are made to U.S. charitable organizations.

As noted, the facts of this case were unusual.  A testator’s Will expressed his wishes to be cryogenically preserved at a U.S. charitable institution following his death.  The Will also directed that the testator’s estate trustee make payments from his estate to the U.S. institution to provide lifetime financial support for his cryopreservation.  The CRA was asked to determine whether the payments constituted gifts to a qualified donee, so as to entitle the testator’s estate to claim Canadian tax credits.  Not surprisingly, the estate trustee’s desire to claim a tax credit on disbursements made to the U.S. charitable institution was problematic for several reasons.

As noted in the technical interpretation, individual taxpayers are eligible to claim a tax credit for the eligible amount of a gift made to a qualified donee, so long as the gift is evidenced by an official tax receipt.  The Act enables a taxpayer to make gifts by Will and deems those gifts to have been made immediately before the taxpayer’s death, thereby entitling his or her estate to claim a tax credit in the year of death. However, in order to qualify for a charitable tax credit, gifts must be made with the proper donative intent and to a qualified donee.

Since the Income Tax Act does not provide a definition of the term “gift,” CRA referred to its common law meaning. At common law, a “gift” is defined as a voluntary transfer of property to a donee who receives and accepts the gift without any benefit whatsoever to the donor.  CRA noted that the proposed split-receipting rules in the Act now enable donors who receive a benefit, or ‘advantage’, in respect of a gift to a qualified donee to nonetheless claim a charitable tax credit.  The eligible amount of a gift in such circumstances is the excess of the fair market value of the property transferred over the amount of the advantage provided. CRA also noted that if the value of the advantage exceeds 80% of the FMV of the transferred property, there will not be an eligible amount of a gift unless the transferor of the property establishes to the satisfaction of the Minister that the transfer was made with the intention to make a gift.

The CRA took the position that there was no donative intent in this case, since the testator’s estate was really paying for his cryogenic preservation – a service – rather than freely making a gift.  Even if the estate could be considered to have made a gift to the U.S. charitable institution, there was an undeniable advantage to the estate in this case, as the institution was keeping the testator’s body cryogenically preserved.

The fact that the payments were made to a U.S. charitable institution, and not to a Canadian registered charity, presented further problems.  Only gifts made to qualified donees qualify for charitable tax credits.  While all Canadian registered charities are qualified donees, very few international or U.S.-based charities are classified as qualified donees for Canadian tax purposes. Careful attention must therefore be paid to whether gifts made to foreign organizations will qualify for tax credits in Canada.

A special provision exists under the Canada-U.S. Tax Treaty with respect to gifts made to U.S. charities by Canadian resident taxpayers.  So long as a Canadian taxpayer makes a gift to a U.S. organization that is exempt from paying tax in the U.S., and that could otherwise qualify as a registered charity in Canada if it was established in Canada, the gift will qualify for Canadian charitable tax credits as though it had been made to a qualified donee.  However, the tax credits in such cases may only be applied against a taxpayer’s U.S. source income.  This means that if a taxpayer does not earn any income from sources in the U.S. during a taxation year, he or she will not be able to take advantage of the Canada-U.S. Tax Treaty and cannot obtain tax relief in respect of gifts made to U.S. charities.  As this applied to the deceased, no Canadian tax relief would have been available in respect of the contributions to the U.S. organization, even if the contributions otherwise qualified as gifts.

This scenario, while unusual in some respects, addresses issues that apply frequently in the context of charitable gifts.  It is important that individuals and charities understand the rules surrounding split-receipts and donations to U.S. charities to ensure that all receipts issued and all credits claimed are consistent with the law and CRA policy.  Individuals and organizations who have any questions about any aspect of chartable gifts should feel free to contact us.


This publication is provided as an information service and may include items reported from other sources. We do not warrant its accuracy. This information is not meant as legal opinion or advice.

Miller Thomson LLP uses your contact information to send you information electronically on legal topics, seminars, and firm events that may be of interest to you. If you have any questions about our information practices or obligations under Canada's anti-spam laws, please contact us at

© 2022 Miller Thomson LLP. This publication may be reproduced and distributed in its entirety provided no alterations are made to the form or content. Any other form of reproduction or distribution requires the prior written consent of Miller Thomson LLP which may be requested by contacting