If you have received a non-cash gift of property, you need to have it appraised for fair market value (FMV) – for your charity’s books, and so you are able to issue a tax receipt to the donor. According to the Canada Revenue Agency, fair market value is normally the highest price that the property could bring in if the market was open and unrestricted and the buyer and seller are both willing, knowledgeable, informed, prudent, and independent of one another.
It is important to keep in mind the following:
- The $1,000 threshold – If the FMV is less than $1,000, a member of the registered charity or other competent, knowledgeable individual can determine the property’s value. If the FMV is likely more than $1,000, the CRA recommends third party professional assessment of the property. Remember to include the name and address of the appraiser on the tax receipt.
- Deemed fair market value – The FMV of the property might be different at the time of donation then when the donor originally acquired it. In some cases the charity would then only be able to issue a tax receipt for the lesser amount. This can also be the case when the donor originally acquired the property as part of a tax shelter. Read this page on the CRA website for more information on when deemed fair market value is applicable.
- Fair market value for Advantages – For any donation, a charity must deduct the FMV of the advantages the donor receives (if any) to determine if only a portion of the amount of the gift can be receipted. Depending on the ratio of the value of the advantage to the value of the donation, the charity will: a) only be able to receipt for the amount of the donation less the value of the advantage, b) be able to issue a receipt for the full amount of the donation, or c) might not be able to issue a receipt at all. See this FAQ or visit this page on the CRA website for more information on these ratios and on how to handle split receipting.
Remember, it is the onus of the registered charity, and not the donor, to ensure that the FMV recorded on tax receipts is accurate.
