The first point is that the term “fair market value” is used throughout the Income Tax Act. It's a question of fact as to what the market value of something is. It's generally speaking the amount that a willing buyer and seller will negotiate in an open market. There's nothing in the Income Tax Act that defines what this is, but it's essential that we use this term in various places to try to determine a valuation where there's not an exchange of cash. In the context of gifts, people can be allowed a tax credit for an individual if they make a donation, and the tax credit will be based on the fair market value of the property that's been transferred to the charity.
There are some difficulties in deciding what the value of a property is. There have been court cases that have gone different ways in the context of some of these tax shelter schemes. In some cases, there's been past jurisprudence where the courts have accepted the valuation that's been given by an appraiser to, for instance, a group of artwork that's been purchased at a low cost and then has been appraised at a high value and then donated. There have been others where the courts have gone the other way and said that the value of that artwork, in the cases in particular, is the bulk price that was paid by the promoter or arranged by the promoter.
Now there are provisions, as Ted has mentioned, in this bill, which try to address some of the schemes to take some of the guesswork out. What they do is say that if you are involved in a gifting arrangement, then if you make a gift within three years of a property that you've acquired for the purpose of making a gift of it, then the fair market value will be deemed to be the amount that you paid. That's one of the measures that's in the bill in respect of gifting arrangements.