Donating Publicly Listed Shares To A Private Foundation

On May 31, 2017 the Canada Revenue Agency (the "CRA") released its view on whether a transfer of publicly listed securities by a corporation to its sole shareholder that is a private foundation for no proceeds would result in a taxable capital gain. In particular, the CRA was asked whether the transfer would be considered a "gift" to a "qualified donee" for purposes of paragraph 38(a.1) of the Income Tax Act (Canada) (the "ITA"), thereby deeming the taxable capital gain resulting under subsection 69(4) to be zero. The CRA stated that the answer depends on whether the transfer of the shares constitutes a "gift" at law.

Under subsection 69(4) of the ITA, a corporation that transfers property to its shareholder for inadequate consideration is deemed to have disposed of the property for consideration equal to the property's fair market value. This would generally result in a taxable capital gain to the corporation making the transfer. However, subsection 38(a.1) deems