In strict common law, no contract, with attendant reciprocal legal obligation, exists without consideration. But for a gift, the absence of consideration is a requirement.
As Justice Jackett wrote in Littler v Canada:
"A contract of sale, which is, by definition, a transfer of property for a consideration, cannot be a gift, which is, by definition, a disposition of property without consideration."
In Re Bayoff Estate, the Court adopted this list of requisite elements for a valid gift:
"(A)n intention to donate; acceptance of the gift; and a sufficient act of delivery."
At issue in the Littler decision was income tax and in particular the oft-involved concept of gifts. As of 2007, the Canadian Government allows the deduction of taxable income by the value of a gift to specified persons, such as registered charities.
Income tax statute routinely modifies the common law definition of a gift to fit the particular needs of tax policy.
The American Internal Revenue Service (IRS), as of 2007, takes this position in regards to gifts:
"Gifts include money and property, including the use of property without expecting to receive something of equal value in return. If you sell something at less than its value or make an interest-free or reduced-interest loan, you may be making a gift."
This is the circa 2007 Canada Revenue Agency's position on what a gift is:
"A gift is a voluntary transfer of property without valuable consideration to the donor. However, under proposed legislation, for gifts made after December 20, 2002, a transfer of property for which you received an advantage ... will still be considered a gift for purposes of the Income Tax Act as long as we are satisfied that the transfer of property was made with the intention to make a gift. An intention to make a gift will be presumed where the fair market value (FMV) of the advantage does not exceed 80% of the FMV of the transferred property."
The common law definition appears to exclude the value of gratuitous services from the definition of a gift.
In Slobodrian v. Canada, the Federal Court had to consider "whether amounts claimed by the (retired Université Laval professor) as charitable donations meet that description under the Income Tax Act. In particular, is the provision of professorial and research services, on a voluntary basis, a gift...?"
In words that any tax lawyer would quickly process to advantage for his clients, the Court concluded that:
"A gift for income tax purposes must involve the transfer of something known to law as property.
"The mere supply of services without compensation involves no property and hence cannot form the subject matter of a gift.
"This is to be contrasted with remunerated services which once performed give rise to rights capable of ownership and which can in turn form the subject matter of a gift. The simplest example of this would be the remunerated worker who assigns gratuitously his right to the remuneration which he has earned. In the present case, it is common ground that the applicant was to render his services without any form of compensation."
In civil law, the concept is known as either "donation" or "gift". The Civil Code of Quebec defines a gift as:
"1806. Gift is a contract by which a person, the donor, transfers ownership of property by gratuitous title to another person, the donee; a dismemberment of the right of ownership, or any other right held by the person, may also be transferred by gift. Gifts may be inter vivos or mortis causa."
References and Further Reading:
- Re Bayoff Estate 2000 SKQB 23, published at canlii.org/en/sk/skqb/doc/2000/2000skqb23/2000skqb23.html
- Littler v Canada 1978 CTC 235 (Federal Court of Appeal, Canada)
- IRS publication Gift Taxes, IRS Tax Tip 2007-39, published at irs.gov
- Slobodrian v. Canada 2003 FCA 350, ,published at canlii.org/en/ca/fca/doc/2003/2003fca350/2003fca350.html
- Income Tax Act, R.S.C. 1985, c. 1 (5th Supp.), published at canlii.com/ca/sta/i-3.3
- Civil Code of Quebec, published at canlii.com/qc/laws/sta/ccq/index.html