Summary Policy

Date
September 3, 2003

Reference Number
CSP - N05

Key Words
Non-qualifying security

Policy Statement

A non-qualifying security is a share in a corporation that the donor does not deal with at arm's length and whose shares are not listed on a prescribed stock exchange (e.g., a share in a privately held company) or a debt obligation (e.g., a promissory note) issued by a company or person that is not at arm's length to the donor.

A registered charity can only issue an official donation receipt to the donor of a non-qualifying security if the security is an excepted gift, or if within five years of acquiring the non-qualifying security:

• the charity disposes of the non-qualifying security; or
• the security ceases to be a non-qualifying security (i.e., a privately held company goes public and its shares become listed on a prescribed stock exchange).

A non-qualifying security is considered to be an excepted gift if it meets all of the following criteria:

• it is in the form of a share;
• the charity that receives the non-qualifying security is a charitable organization or public foundation;
• the donor is at arm's length to the charity; and
• the donor is at arm's length to each of the charity's directors/trustees.

References

• Donor, CSP - D17.
• Fair Market Value (appraisal), CSP - F02.
• Gift, CSP - G01.
• Loanback, CSP - L07.
• Prescribed Stock Exchange, CSP - P17.
• Receipt, CSP - R02.
• Share, CSP - S04.
• Non-Qualifying Security, CIL-1999-024.
• 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), 118.1(13), (14), (15), (18) and (19).