A donor cannot specify the ultimate beneficiary of a gift, and the gift generally cannot benefit the donor or anyone who is not at arm’s length from the donor. That is, there can be no private benefit. If either of these conditions apply to the gift, CRA does not allow the charity to issue a tax receipt.
Example 1: A donor gives $1,000 to a charity for the specific purpose of funding Jean David’s attendance at a music course given by the charity. For a donation to be eligible for a tax receipt, the charity must be able to freely apply the funds within a program (the music course) or within other similar programs at its discretion. In this case, the donor has directed specific individuals on whom the funds must be spent. Therefore no tax receipt can be issued.
Example 2: A donor gives $1,000 to a charity specifically to help reduce the cost of offering a music program. The charity is then able to lower the fees it charges its students. Because the donor has not directed that the donation is to be used for a specific individual, it is eligible for a tax receipt.
Example 3: A donor gives $1,000 to a charity specifically to fund a bursary program to help disadvantaged youth participate in a music program. The charity sets the criteria and selects the students to be supported. Because the donor has not directed that the donation is to be used for a specific individual, it is eligible for a tax receipt.
Example 4: A donor gives $10,000 to benefit the family of a specific victim of a traffic accident. Because particular individuals have been identified by the donor, it is not eligible for a tax receipt. If the donation was instead intended to benefit any victim of a traffic accident, it would be within the charity’s discretion as to how to apply it, and therefore a tax receipt could be issued.