Alumni Living in the U.S.
Are you a graduate of the University of Ottawa living in the United States? You can support the University of Ottawa and benefit from a tax deduction on your American tax return.
The Canadian-U.S. Income Tax Convention (also known at the “Tax Treaty”) allows charitable income tax deductions under the following conditions:
- Under Article XXI (5) of the Treaty, you can make a contribution to a Canadian college or university if you, or a member of your family, are or were enrolled. Your family members for this purpose are your brothers and sisters (whether by whole or half-blood, or by adoption), spouse, ancestors, lineal descendants and adopted descendants. The usual U.S. donation limits still apply.
- You have income earned in Canada and the gift is to a registered Canadian charity that would have a similar status if it were located in the U.S. In this case, the gift is deductible against the Canadian source income, subject to U.S. percentage limitations.
Friends of the University of Ottawa
If neither you nor any of your family members have ever been enrolled at the University of Ottawa, you can still make a donation through the Friends of the University of Ottawa and be eligible for a charitable tax deduction on your United States income tax return.
Friends of the University of Ottawa is an independent charity organized in the United States that works to advance the University by supporting special projects approved by its board of directors.
To qualify for a United States charitable contribution tax receipt, gifts to the Friends of the University of Ottawa must be unconditional. You may, if you wish, make a recommendation on how your gift will be used to advance the University. To take advantage of this option, please make your cheque payable to the “Friends of the University of Ottawa” and send it to
Friends of the University of Ottawa
c/o Roha & Flaherty
1725 I Street N.W., Suite 300
Washington, D.C. 20006-2423
The Tax Treaty and the tax laws are very clear with respect to the tax treatment of outright gifts of cash and cash bequests across the Canada/U.S. border.
United States law allows for American donors to leave charitable bequests to a Canadian charity such as the University of Ottawa and receive the same tax benefits as for a charitable bequest to an American charity, provided that the Canadian charity, if situated in the U.S., would qualify as a charitable organization.
However, certain types of charitable donations require special consideration:
Gifts of appreciated securities
If a donor owns the securities for more than one year, the donor is eligible for a tax deduction equivalent to the current value of the securities, and is not taxed on the resulting capital gain (the difference between the current value and the original purchase price). If the securities have been owned for less than one year, the donor is still not taxed on the gain but the deduction is limited to the adjusted cost base.
Gifts of life insurance
If ownership of a life insurance policy is transferred irrevocably to a qualifying charity organized in the United States or to a Canadian university under the above discussed tax treaty, the donor receives a tax deduction for either the replacement value (for a paid up policy) or for the cash surrender value (for a policy for which premium payments are still being made). In the case of the policy where premiums are still being paid, the donor also receives a tax deduction for the value of the annual premiums. In the case of a new policy turned over immediately to the university, the donor can deduct the value of the premium paid to put the policy in place as well as all subsequent premium payments. If the premiums are paid to the charity, the donor is entitled to a charitable contribution deduction up to fifty percent of the donor’s adjusted gross income (if the gift is to a university or other public charity). If the premiums are paid directly to the insurance company, the law is less clear; in this circumstance, the gift may be deemed a gift “for the benefit” of a charity, and may thus be deductible only up to thirty percent of the donor’s adjusted gross income.
As in Canada, should the death benefits of a life insurance policy be transferred directly to the university, the donor’s estate may use the resulting tax receipt to offset estate tax payable on the donor’s estate tax return.
Charitable remainder trusts
A charitable remainder trust pays an annual income for the life of the donor. It provides an immediate income tax charitable deduction for the present value of the remainder interest going to a university or other public charity. As well, if the trust is funded with appreciated property, the donor pays no tax on the capital gain. The trust, which because of its charitable status is tax exempt, may sell the asset, reinvest the proceeds of the sale and also pay no tax on the gain. For this reason it is most common to transfer highly appreciated assets, which have been providing little or no income to the donor.*
An American donor who creates a charitable remainder trust to benefit the University of Ottawa must name the Friends of the University of Ottawa as the remainder beneficiary. To ensure that your outright cash or planned gift meets the requirements for an American tax deduction, or to arrange a confidential conversation or meeting, please contact:
University of Ottawa
190 Laurier Avenue East
Ottawa, Ontario K1N 6N5
This information is general in nature. It does not constitute legal or financial advice and should not be relied upon as a substitute for professional advice. We strongly encourage you to seek professional legal, estate planning and/or financial advice before deciding upon your course of action.