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Beneficiaries, Gifting, trust, Trustee Act, Trustee Resolutions, Trustees

To gift or not to gift – that is the question

The case of The Church of Jesus Christ of the Latter-Day Saints Trust Board v CIR considers whether donations made in connection with a missionary application are charitable gifts for the purposes of s LD1 of the Income Tax Act 2007.

The crux of the matter for consideration is whether gifts made by church members or persons related to the missionary are gifts for tax purposes.

Of interest is that there is no reference in the Latter-Day Saints case to the 2107 High Court decision in Broadbent v MSD (currently awaiting the decision of the Court of Appeal).

The primary issue in the Latter-Day Saints case is whether payments that otherwise comply with s LD 1 of the Income Tax Act 2007 (tax credits for charitable gifts) are gifts.   The specific nature of the payments in question is set out in the Latter-Day Saints case.

The position for the plaintiffs is that Ward Missionary Fund payments are gifts because they are gratuitous payments made by Church members to support the Church’s charitable works.

The position of the CIR is that the payments are not gifts, but are made to so that the Church will met the essential cost of missionaries.

Central to the determination of the matter is “What is a gift?”

Curiously, neither party referred to the 2017 High Court decision in Broadbent v MSD, which considered at length what comprised a gift, referring instead to the 1983 decision in Mills v Dowdall.

Of interest was the position propounded at [43] of the Latter-Day Saints case that the form of the transaction was more relevant than the substance.   Of additional interest is the determination in the Latter-Day Saints case as to what comprises a gift (property owned by a donor, voluntary transfer and no donor benefit) rather than set out in Broadbent (intention to transfer, acts to effect the transfer and acceptance of the gift).

The primary issue for reconciliation is whether the test of gift differs in the context of a family trust compared with a charitable trust.

In the Latter-Day Saints case the determinative factor was the relationship between the donor and the element of benefit, rather than the fundamental terms of what it is to be a gift.

Taken in the broader context of family trusts the Latter-Day Saints decision warrants further consideration as, objectively, if a settlor who can benefit from a trust makes a gift – if the settlor continues to benefit from the gifted property – is it a gift?

Is the distinguishing consideration any tax deduction – or is it the element of residual benefit??

References:

  • The Church of Jesus Christ of the Latter-Day Saints Trust Board v CIR [2019] NZHC 52
  • Broadbent v MSD [2017] NZHC 1499
  • Income Tax Act 2007, s LD 1
  • Mills v Dowdall [1983] NZLR 154

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