Giving Securities

Gifts of stock, mutual funds, and other appreciated securities* are now more appealing than ever because the capital gain in a qualifying gift of securities is exempt from taxation. Consequently, you will pay less tax on the gain when you donate, as opposed to sell, these securities.

To assist donors, the Douglas-Coldwell Foundation has made the gifting of securities an easy two-step process:

1. Completing a “share transfer form” available from the Douglas-Coldwell Foundation. This should be done with the assistance of your broker. Download the form here (PDF)

2. Transferring shares to the Douglas-Coldwell Foundation’s brokerage account at ScotiaMcLeod.

The Douglas-Coldwell Foundation will issue a tax receipt for the closing price of the shares on the date the transfer is received by ScotiaMcLeod and then a tax credit can be claimed in the donor’s tax return for the year.

For more specific information about giving securities to the DCF, you can contact Shelagh Maurice at ScotiaMcLeod, the DCF’s broker at (613) 782-6758 – Monday to Friday – 8 am to 4 pm ET. For general questions on donating to the DCF please contact our office.

*SECURITIES ELIGIBLE FOR TAX BENEFITS

Eligible securities include: Mutual and segregated funds, shares, bonds, bills, and warrants listed on a Canadian stock exchange or certain foreign stock exchanges such as New York, London, Tokyo, and NASDAQ.

Note: Securities must be transferred to the Douglas-Coldwell Foundation c/o our broker, ScotiaMcLeod. If securities are sold and the proceeds donated, the enhanced tax benefits do not apply (except for the cashless exercising of options).

TAX INCENTIVES FOR GIFTS OF SECURITIES

Recent tax changes have made it even more attractive to donate publicly traded securities to a charitable cause that's important to you.

Under the old rules, when you donated securities to charity, it was deemed a disposition for tax purposes. That meant that any appreciation in the value of the securities from the date you acquired them to the date they were donated was treated as a taxable capital gain.

However, in the 2006 federal budget, this rule was changed to provide a significant tax break for charitable donors. You may now donate stocks, bonds, futures and options, as well as shares in mutual funds to a registered charity without paying any tax on the capital gain.

As a donor, these tax savings may increase the amount you can afford to give, or simply reduce the our-of-pocket expense of your gift.

SIGNIFICANT TAX SAVINGS

The following table compares the tax consequences of selling a security and realizing a capital gain, versus donating the same security to a charity.

         Sell Security     Donate Security     
Market Value of security $100,000 $100,000
Adjusted Cost Base of security $50,000 $50,000
Taxable portion of capital gain (50%)    $25,000 $0
Tax on capital gain** $11,603 $0
Charitable donation/tax receipt N/A $100,000
Charitable tax credit* N/A $46,410
Net Proceeds $88,398 $46,410

** Based on Ontario's top marginal tax rate of 46.41 %

In this example, making a donation of securities allowed the investor to avoid $11,603 in capital gains tax in addition to receiving a $46,410 charitable tax credit. On an after-tax basis, when you factor in both the tax credit and the capital gains savings, this $100,000 gift to charity cost the investor only $41,987.

It is now possible for you to donate shares and receive a charitable tax receipt equal to their market value, without triggering any capital gains tax. Thanks to this new tax legislation, it's never been more affordable to show your generosity.

***The information contained is general in nature and is subject to change with individual circumstances. Consult a professional advisor for detailed information tailored to your circumstances and to confirm appropriate applicable tax benefits.

 

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