How Are Charitable Donations Made in a Will Claimed on the Final Return in Canada?
This answer covers Canadian federal tax law, which applies in every province.
Gifts made by will are deemed made by the estate, not by the person who died, at the time the property transfers to the donee. The estate may carry such a gift back to the final return (or an earlier graduated rate estate year) if it meets graduated rate estate requirements except the 36-month limit, the gift is made within 60 months after death, and the property was acquired on and as a consequence of death.
On the final return, donations are limited to 100% of net income on line 23600, and eligible gifts in the year of death plus unclaimed gifts from the prior 5 years count. Any excess can be claimed on the previous year's return up to 100% of that year's net income. Donations cannot be carried forward from a final return to a T3.
On a T3 return, the estate's donation claim is limited to 75% of the trust's net income, plus 25% of taxable capital gains and recaptured CCA from the gifted property. Whether an estate qualifies as a graduated rate estate changes which limits apply, so confirm the details with a lawyer or accountant.
Key takeaways
- Gifts by will are deemed made by the estate at the time the property transfers to the donee.
- A gift by will may be carried back to the final return if it meets graduated rate estate requirements except the 36-month limit and is made within 60 months after death.
- On the final return, donations are limited to 100% of net income on line 23600, and any excess can be claimed on the previous year's return up to 100% of that year's net income.
- On a T3 return, the estate's donation claim is limited to 75% of the trust's net income, plus 25% of taxable capital gains and recaptured CCA from the gifted property.