If you own stock, it can be “tax-wise” to donate with stock rather than cash. As of May 2, 2006, charitable gifts of publicly listed securities are now exempt from all capital gains taxation. You can now donate publicly traded shares to the Canadian Art Foundation and not pay any capital gains tax.
Qualifying securities include stocks or bonds listed on a stock exchange, eligible mutual fund units or shares, as well as segregated funds of life insurance companies. Generally, as a result of this special tax treatment, donating qualifying securities is more tax-effective than selling the securities and donating the cash.
The same special tax treatment also applies to the donation of qualifying shares acquired through the exercise of qualifying stock options. Provided certain conditions are met, additional relief from the taxable employment benefit is provided by way of a 100 per cent stock option deduction for donations made after May 1, 2006. This favourable tax treatment is also available if the shares are sold immediately after exercise, and the proceeds are donated to a charity.
|Simplified Example for Illustration Purposes; Provincial Rules May Differ||Donate Qualifying Securities (After May 1, 2006)||Sell Securities and Donate Cash|
|Charitable Donation Tax Credit||$22,500.00||$22,500.00|
|Capital Gains ($50,000 – $10,000)||$40,000.00||$40,000.00|
|Taxable Capital Gain||$0.00||$20,000 (50%)|
|Tax Payable @ 45%||$0.00||$9,000.00|
|Net Tax Benefit from Donation||$22,500.00||$13,500.00|
Given the complexities involved in donating securities, professional tax advice should be sought before any action is taken. If you do not have a professional advisor, the Canadian Art Foundation would be happy to introduce to you a professional tax consultant.
For information on donating gifts of securities, please contact Caroline Chan at email@example.com, or (416) 368-8854, ext. 111.
To donate gifts of securities, please download, print and process the following form:
Release for Securities Transfer to the Canadian Art Foundation (PDF)