Donation of a Gift in Kind

A registered charity can issue an official donation receipt to the donor for the fair market value of property donated for a charity auction. A gift is a voluntary transfer of property without consideration. Services, ie: time, skills and effort, are not property. Therefore they do not qualify as gifts. Examples are accounting, maintenance, certain personal items. In the event that services are donated it is suggested that an exchange of cheques occur. That is the charity pay the donor for the services with a cheque and the donor donated his/her cheque back to the charity. The fair market value is determined at the time of the donation and if purchased within three years may be the retail price paid. The donor must establish the value of the donation at the time it is donated. Once the value is set the person acquiring the item at auction may also be entitled to a charitable donation receipt. The value must be known to all bidders in advance and when the amount paid exceeds the posted value there could be a donative intent. The CRA has established that a bid amount higher than 125% of the posted amount indicates an intent to donate. The bidder will receive a charitable donation receipt for the amount in excess of the posted amount. However, neither the bidder nor the donor will be entitled to the charitable receipt unless the fair market value is declared at the time the gift is given to the charity and that amount is posted so that it is known ahead of time to all bidders. In the event that a commercial enterprise donates property from their inventory, the charity will likely issue a charitable donation receipt based on the retail value of the property not the cost. The business will be responsible to declare this same amount as income, take the cost as an expense, and deduct the charitable donation.