Income Tax Act — I-3.3 248
ntage in respect of a gift or monetary contribution, is equal to the fair market value of the property at the time the gift or monetary contribution is made. Repayment of limited-recourse debt (34) If at any time in a taxation year a taxpayer has paid an amount (in this subsection referred to as the “repaid amount”) on account of the principal amount of an indebtedness which was, before that time, an unpaid principal amount that was a limited-recourse debt referred to in subsection 143.2(6.1) (in this subsection referred to as the “former limited-recourse debt”) in respect of a gift or monetary contribution (in this subsection referred to as the “original gift” or “original monetary contribution”, respectively, as the case may be) of the taxpayer (otherwise than by way of an assignment or transfer of a guarantee, security or similar indemnity or covenant, or by way of a payment in respect of which any taxpayer referred to in subsection 143.2(6.1) has incurred an indebtedness that would be a limited-recourse debt referred to in that subsection if that indebtedness were in respect of a gift or monetary contribution made at the time that that indebtedness was incurred), the following rules apply: (a) if the former limited-recourse debt is in respect of the original gift, for the purposes of sections 110.1 and 118.1, the taxpayer is deemed to have made in the taxation year a gift to a qualified donee, the eligible amount of which deemed gift is the amount, if any, by which (i) the amount that would have been the eligible amount of the original gift, if the total of all such repaid amounts paid at or before that time were paid immediately before the original gift was made, exceeds (ii) the total of (A) the eligible amount of the original gift, and (B) the eligible amount of all other gifts deemed by this paragraph to have been made before that time in respect of the original gift; and (b) if the former limited-recourse debt is in respect of the original monetary contribution, for the purposes of subsection 127(3), the taxpayer is deemed to have made in the taxation year a monetary contribution referred to in that subsection, the eligible amount of which is the amount, if any, by which (i) the amount that would have been the eligible amount of the original monetary contribution, if the total of all such repaid amounts paid at or before that time were paid immediately before the original monetary contribution was made, exceeds (ii) the total of (A) the eligible amount of the original monetary contribution, and (B) the eligible amount of all other monetary contributions deemed by this paragraph to have been made before that time in respect of the original monetary contribution. Deemed fair market value (35) For the purposes of subsection (31), paragraph 69(1)(b) and subsections 110.1(2.1) and (3) and 118.1(5.4), (6) and (13.2), the fair market value of a property that is the subject of a gift made by a taxpayer to a qualified donee is deemed to be the lesser of the fair market value of the property otherwise determined and the cost or, in the case of capital property, the adjusted cost base or, in the case of a life insurance policy in respect of which the taxpayer is a policyholder, the adjusted cost basis (as defined in subsection 148(9)), of the property to the taxpayer immediately before the gift is made if (a) the taxpayer acquired the property under a gifting arrangement that is a tax shelter as defined in subsection 237.1(1); or (b) except where the gift is made as a consequence of the taxpayer’s death, (i) the taxpayer acquired the property less than three years before the day that the gift is made, or (ii) the taxpayer acquired the property less than 10 years before the day that the gift is made and it is reasonable to conclude that, at the time the taxpayer acquired the property, one of the main reasons for the acquisition was to make a gift of the property to a qualified donee. Non-arm’s length transaction (36) If a taxpaye