Summary Policy

Date
September 3, 2003

Reference Number
CSP - L07

Key Words
Loanback

Policy Statement

Under the Income Tax Act, the loanback provisions apply when a donor makes a gift to a qualified donee and within five years of the making of the gift the donee:

• acquires a non-qualifying security from the donor; or
• allows a donor who is not at arm's length to the charity, to use the charity's property within certain time frames.

If such is the case, the donor has to reduce the amount claimed for income tax purposes by the value of the property used, even if the donor is paying rent or giving the qualified donee something in exchange for the right to use the property.

However, donors can use property that the charity uses to deliver its programs without the loanback provisions affecting them (e.g., a hospital's emergency department).

References

• Donor, CSP - D17.
• Non-Qualifying Security, CSP - N05.
• Property, CSP - P05.
• Qualified Donee, CSP - Q01.
• Loanback, CIL-1998-017, CIL-1998-022, CIL-2000-016.
• Completing the Registered Charity Information Return, T4033A.
• Registered Charities and the Income Tax Act, RC4108.
• Income Tax Act, R.S.C. 1985 (5^th supp.) c. 1, ss. 110.1(6) and 118.1(16).