Charitable Donations By An Estate And "Substituted Property"

In a previous article,¹ we discussed amendments to the Income Tax Act (Canada) (the "Act"), enacted in 2015, that significantly changed the rules for testamentary charitable gifts made in 2016 and future tax years.

One of the requirements introduced as part of the 2015 amendments was the requirement that, to qualify for a charitable donation tax credit, the property which is the subject matter of the charitable gift must be either property that was acquired by the deceased taxpayer's estate on and as a consequence of death, or property that is substituted for it. We noted that, in an estate that holds shares of a private company, if a charitable gift made by will is satisfied using funds paid to the estate from the company in the form of a cash dividend, the dividend is not generally considered substituted property (unless paid on a redemption of the shares).