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Published: December 23, 2021

David Rotfleisch, a tax lawyer with Rotfleisch & Samulovitch P.C. in Toronto, shared his thoughts and opinions regarding the decision on the eligibility of an estate for a charity donation tax credit in relation to the estate’s donation of shares of a private corporation to an non-arm’s length foundation.

“First, a promissory note is not adequate consideration if the parties involved were acting at non-arm’s length. Parliament permitted tax credits for situations where the donor is impoverished, and the recipient (charity) is enriched. Because a promissory note does not create a genuine intention to pay between non-arm’s length parties who can use the promissory note as formality but never actually make the payments, a promissory note is not adequate consideration,” said Rotfleisch

“Second, timing is important. Consideration must be received at the time of disposition and such consideration must not be a non-qualifying security, such as a promissory note. If you are planning on making gifts of non-qualifying securities to registered charities, this case shows that certain requirements must be met to claim a charitable tax credit, ” he added.

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"This article provides information of a general nature only. It is only current at the posting date. It is not updated and it may no longer be current. It does not provide legal advice nor can it or should it be relied upon. All tax situations are specific to their facts and will differ from the situations in the articles. If you have specific legal questions you should consult a lawyer."

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