Canada currently has over 80,000 registered charities. According to a study
released in December, 2004, on charitable giving by the Standing Senate
Committee on Banking, Trade and Commerce, in 2003, 5.6 million Canadians made
financial or in-kind donations worth approximately $6.5-billion to various
charities.
Many individuals also contribute their time, as well as money to charity.
Have you ever wondered if you can receive a donation tax receipt for the fair
market value of your time? That issue came before the Tax Court earlier this
month.
Rodolfo Slobodrian is a retired professor from Laval University and from 1999
through 2002, he claimed charitable donation credits on his tax returns for
amounts ranging from $18,000 to $45,000. During those years, he participated in
advance research and teaching for the Canadian Space Agency. He did not charge
anything to the agency for his time, but, for the purpose of calculating his
donation tax credits, valued his unpaid time at an hourly rate of $24,
corresponding to the rate of pay of his most senior assistant and which
represented, "the lowest possible rate at which [his] work may be valued."
Each year, the Canada Revenue Agency rejected Mr. Slobodrian's tax credits
maintaining that no actual "gift" was made during the years in question.
The judge, in reviewing the case, explained that a "gift" for the purpose of
the donation tax credit must involve the transfer of "property." According to
the judge, "the mere supply of services without compensation involves no
property and hence cannot form the subject matter of a gift."
The judge further commented that this may be contrasted with the example of a
salaried employee who, when the work is completed, earns a right to her salary,
which, once received, can then be turned into a gift.
Mr. Slobodrian disagreed, arguing that what he donated was "scientific
research" and "higher-education teaching" and not services. He claimed that as a
result of his efforts, the Canadian Space Agency became the owner of valuable
research which constituted intellectual property which, in turn, can form the
subject matter of a gift.
Unfortunately, the evidence produced in court showed that the agreements
under which Mr. Slobodrian conducted his research provided that any intellectual
property developed would "vest in Canada and not... any member of the research
team." Since the research was never owned by him, it could not form the basis
for a gift and the judge dismissed his case.
One final note -- if the charity pays you for your services (for example,
bookkeeping, legal work, etc.) and you then donate the amount paid to you back
to the charity, you would be able to claim a donation tax credit for that
donation.
Be forewarned, however, that you also must declare the amount that the
charity paid you for your services in your taxable income so, unfortunately, you
will not generally come out ahead.