In 2006 the Federal Government eliminated the capital gains tax on donations of publicly traded securities to public
Capital gains is the increase in the value of the securities realized when the securities are sold. Typically 50% of the capital gain is taxable;
however, 0% of the capital gain is taxable on shares that are gifted to a charitable organization.
The benefits of giving shares to Alzheimer Toronto include:
- Immediate donation receipt for fair market value of the security, determined for most securities from their closing price on the date of the gift
- Favourable reductions in capital gains taxation
- Increase in the donation claim limit
- Alzheimer Toronto pays no tax on sale
- Gifts can be given during donor’s lifetime or after, through their estate
Securities may be transferred in 1 of 2 ways:
- The donor delivers endorsed certificates to Alzheimer Society of Toronto. The gift is complete the day the certificate is delivered.A donation receipt is based on the value of the security that day.
- The donor transfers the securities from his/her brokerage account to Alzheimer Society of Toronto’s account. The gift is complete when
the securities are transferred to the Society’s account.
Example: Donation of Capital Property versus Cash
Mr. Smith is considering a $100,000 donation to the Alzheimer Society of Toronto, and has sufficient net income to claim the full amount of the donation in the year in which it is made. Among his assets are 1,000 shares of Company XYZ, a publicly listed corporation.
The shares have a fair market value of $100,000 and an original cost of $1,000.
Mr. Smith is evaluating two alternatives:
- Selling his shares and making a $100,000 cash donation OR
- Transfering Company XYZ shares to Alzheimer Society of Toronto for the fair market value of $100,000.
We have assumed that Mr. Smith is in the top marginal tax bracket (taxable income in excess of approximately $116,000) and
that the combined federal and provincial top marginal rate is 45%.