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Ottawa, December 22, 1997
1997-124
Finance Minister Announces Income Tax Change for Charitable Gifts
Finance Minister Paul Martin today announced a change to the measure dealing with charitable donations and the capital dividend account contained in Bill C-28. That bill implements the income tax measures announced in the February 1997 budget as well as a package of technical changes to the Income Tax Act.
Bill C-28 implements the February 1997 budget proposal to reduce the income inclusion rate on capital gains arising from donations to charities of publicly-traded securities from 75 per cent to 37½ per cent. Another measure in the bill, however, could have placed charitable gifts by private corporations at a disadvantage relative to gifts made directly by individuals. Today's change corrects this imbalance.
Special features of the income tax system provide parity between the treatment of certain kinds of income when earned by a private corporation and when earned directly. A private corporation that realizes a capital gain can add the non-taxable portion of the gain to its capital dividend account (CDA). Amounts from this account can be paid out to shareholders as tax-free dividends.
Bill C-28 would have denied corporations the ability to add amounts to their CDAs in respect of gains realized on any gift of property. In order not to diminish the incentive for charitable giving, the Minister today announced that CDA treatment will be maintained for gifts to registered charities and other qualified donees for which charitable gift deductions are available.
In addition, since Bill C-28 was not tabled until December 8, 1997, the effective date will be changed so that the rule denying CDA treatment applies only to non-charitable gifts made after December 8, 1997.
The Minister indicated that amendments to implement the changes announced today would be introduced in the House of Commons when the Bill reaches the second reading stage.
For further information:
James Greene
Tax Legislation Division
(613) 992-4853
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| Last Updated: 2005-01-04 |
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