Importance of Cultural Property

  • Encourage the acquisition of national treasures within Canada by institutions and public authorities
    • Example: museums, art galleries
  • Preserve and exhibit such treasures to the public
  • Tax benefits as an incentive to encourage the gifting of cultural property to enrich the collections of such institutions and public authorities

Background

What is certified cultural property?

  • A property of outstanding significance and national importance to Canada, for which a certificate has been issued by the Canadian Cultural Property Export Review Board

Tax Treatment

Overview

  • Disposition of certified cultural property to institutions and public authorities designated by the Minister of Canadian Heritage
    • Individual and corporate donors
    • Sold, donated, or combined donation/sales agreement
    • Tax exemption for capital gains realized
    • Tax credit or deduction to donors, if disposition by way of a gift, up to 100% of their net income

Cultural Property Export and Import Act (CPEIA)

Designated Organization

  • Institution that is publicly owned and is operated solely for the benefit of the public, that is established for educational or cultural purposes and that conserves objects and exhibits them or otherwise makes them available to the public
  • Only designated organizations may apply for certification on behalf of donors and vendors
  • Disposition agreement between donor and the collecting Organization

Cultural Property Export and Import Act (CPEIA)

Criteria for Certification

  • Canadian Cultural Property Export Review Board
    • Object or collection may be deemed of outstanding significance if it satisfies any one or more of the following:
      • A close association with Canadian history
      • A close association with national life
      • Aesthetic qualities
      • Value in the study of the arts
      • Value in the study of the sciences
    • Whether its loss to Canada would significantly diminish the national heritage

Tax Treatment

General Application

  • Taxpayer deemed to have received fair market value as proceeds of disposition of the property
  • There would be an income inclusion if the certified cultural property were a trading asset such as inventory
  • Gift must be evidenced by filing both the receipt from the donee and the certificate provided by the Review Board
  • Must be a gift or sale of the object, not a gift or sale of an interest in an object
  • Intellectual property may not follow the object, which could affect the value of the object
    • E.g. copyright, right to reproduce, etc.

Fair Market Value

Determination by the Review Board

  • Fair market value of an object is deemed to be the fair market value determined by the Review Board
    • CRA gives deference to the Review Board but may reserve the right to administer the Income Tax Act to determine FMV
  • "Eligible Amount" of the object reflects any advantage to donor
  • Application to Review Board must include substantiated monetary appraisals
  • Donors or vendors who are not satisfied with a Review Board determination of FMV can request a Review Board redetermination
  • If donor or vendor disagrees with redetermined FMV, can appeal the redetermined amount to the Tax Court of Canada

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