Tax Benefits

Protecting wilderness land offers significant financial benefits

A donation or conservation easement of all or a portion of your property to an organization such as the Georgian Bay Land Trust (GBLT) will result in you enjoying significant financial benefits by way of:

  • income tax credits
  • the reduction or elimination of capital gains
  • the elimination of property tax on donated land
  • possible reduction of property tax on easements

Below is a brief summary of the various income and property tax benefits that you may receive by a giving a donation or easement or an interest in land to the GBLT. These are guidelines only and we recommend that anyone considering a donation of land consult their own financial and legal advisors.

Fee Simple Donation

A tax receipt is provided for the full Fair Market Value (FMV) of the property
Capital Gain Tax relief as noted above, if the property is certified
Property tax is the responsibility of GBLT and is often exempt

Conservation Easement

A tax receipt is provided based on the difference between the FMV with and without the easement
Capital Gain Tax relief as noted above, if the property is certified
Property tax remains the responsibility of the landowner but can often be reduced

Bargain Sale

A tax receipt is provided based on the FMV of the property minus any advantage provided to the donor (e.g. cash)
Capital Gain Tax relief as noted above, if the property is certified; capital gain may still be applicable on the advantage portion of the sale
Property tax is the responsibility of GBLT and is often exempt

Life Estate

A tax receipt is provided based on FMV of the property minus the value of the advantage provided to the landowner as a result of their continued use of the property
Property tax is the responsibility of the landowner until the time of the transfer of title

Other Agreements

(e.g. lease, stewardship agreement)

Agreements rarely have any immediate financial benefits
Property tax remains the responsibility of the landowner
Regardless of what type of gift you make, the law requires that the gift must be voluntary and without a direct benefit back to you, the donor. If there is a benefit, the donation receipt is reduced by the value of the benefit.

Sale at Fair Value

No tax receipt is provided and capital gains must be recognized by the landowner
Property tax is the responsibility of GBLT and is often exempt

Income Tax Benefits

At its most basic, when land or an easement over your land is donated to the GBLT, an income tax receipt is issued. Like gifts of cash, gifts of land, more specifically gifts of or easements made on capital property and personal-use property, may give rise to non-refundable tax credits (individuals) or deductions (corporations).

Donation receipts for gifts or easements of land or interest in land, are issued at the fair market value (FMV) of the gift at the date it is made. The fair market value is determined by a qualified appraisal. There are a number of guidelines, determined by Canada Revenue Agency (CRA) with respect to appraisals.

Most of the Georgian Bay properties gifted to the GBLT have qualified as “ecologically sensitive” by Environment Canada (a designation that applies to most properties in our area). For land gifts and easements 100% of the gift value of the easement or land donation can be used to offset the donor’s net income in the year of donation. If the full amount of the value cannot be used in the year of the donation (sometimes true where the FMV may be substantial) it may be carried forward for ten years. If the donation is in the year of death, it may be carried back to the year before the death.

Tax On Capital Gains

When land is donated, it is treated for income tax purposes as if you received proceeds equal to its FMV. This means that you must recognize the capital gain (one half of the increase in value above the original purchase cost) in income. In the past, this treatment discouraged donations. Now, however, if the property is given to a charity and has been certified by Environment Canada as an “ecological gift”, the capital gain is reduced to zero. Therefore, where the property is certified, no capital gain is recognized by the donor and the donation may offset up to 100% of the donor’s net income for the year.

Property Tax

Another potential financial windfall for the donor is property tax relief. When title to a property is transferred to the GBLT through a donation or purchase, the property becomes eligible under the Conservation Land Tax Incentive Program. The GBLT assumes the property tax responsibility, but is thankfully exempt.

When ownership is retained by the landowner through a conservation easement or other type of agreement, the property tax responsibility remains with the landowner. If the granting of an easement reduces the property’s assessed value, then an application for a reduction in property tax may be made.

Other Tax Considerations

When land or other property is given to a charity, there may be several other tax benefits. For example, there is no land transfer tax on a gift of land, which otherwise starts at 0.5 per cent of the land’s value.

The tax consequences will vary if the land is considered inventory rather than capital property. If the item donated was created or acquired with the intention to make a profit, the item is considered inventory and donating inventory results in an inclusion in business income at the FMV. If, however, the property has been used for personal enjoyment or long-term business use, then it may qualify as capital property and subject to capital gains treatment.

Regardless of the type of donation, you should seek your own independent advice to ensure that you are making a decision that works best for you.

Download our Tax Scenarios Brochure: GBLT tax scenarios

This brochure is based in part on Ernst & Young’s Guide to the Taxation of Canadian Charities. 2006 (1st) Edition and on a tax benefit summary produced by the Ontario Land Trust Alliance that was written by Ian Attridge in May 2003.