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Home » Documents » Articles » Loanbacks - Summary Policy

Summary Policy

Date
September 3, 2003 (Revised November 19, 2010)

Reference Number
CSP-L07

Key Words
Loanback

Policy Statement

The loanback provisions of the Income Tax Act apply when a donor makes a gift to a qualified donee, and within 60 months of making the gift, either of the following situations occurs:

  • The qualified donee holds a non-qualifying security of the donor that it acquired after the time that is 60 months before the time of the gift. In this case, the fair market value of the gift is reduced by the amount of consideration given by the donee to acquire the non-qualifying security.

    or

  • The donor (or a person or partnership not dealing at arm's length with the donor) uses the qualified donee's property under an agreement that was made or modified after the time that is 60 months before the time of the gift. In this case, the fair market value of the gift is reduced by the fair market value of the property being used.

    This applies even if the donor is paying rent or giving the qualified donee consideration for the right to use the property. However, a donor can use property that a qualified donee uses to deliver its charitable programs without the loanback provisions affecting the donor (for example, a hospital's emergency department).

When the property gifted is a non-qualifying security, the loanback provisions apply only when the gift is an excepted gift.

When the loanback provisions take effect after the qualified donee issues a receipt for income tax purposes, the qualified donee should issue a revised receipt to reflect the FMV as adjusted by the provisions described above. The revised receipt must contain all the required information plus a notation stating that it "cancels and replaces receipt #" (insert the serial number of the previous receipt, which should be marked "cancelled").

The qualified donee's copy of the previous receipt must be kept in the usual manner. A copy of the amended receipt should also be sent to the donor. The donor should then, where necessary, write to the Canada Revenue Agency and request a reassessment to any return that they have already filed based on the previous receipt. 

References