Many donors are attracted to the idea of giving securities because of the preferred tax treatment offered by the Canada Revenue Agency on these gifts. If a donor has a capital gain in their investment, they can gift the actual security instead of selling the investment and giving cash. By doing this, they will pay no tax on the capital gain, instead of tax on 50% of the gain had they sold the security and given cash. The yearly contribution limit for charitable donations of appreciated publicly traded securities is 75% of the donor’s net income (except in the year of your death, then the limit is 100% of net income).
What securities qualify?
- Stocks
- Bonds
- Mutual Funds
- Trust Units
- Depreciated securities
- Futures, options
- Employee Stock Options (within guidelines)
What are the benefits?
- A tax credit that is typically equal to the highest marginal tax rate
- You receive a tax receipt for the fair market value of the donated shares in the amount of the closing trading price on the day The OHF receives the security
- Your donation is exempt from the capital gains tax that typically applies to sale of securities
- For depreciated securities, capital losses in Canada can be carried back 3 years and forward indefinitely to offset capital gains.
Significant tax savings:
The table compares the tax consequences of donating cash proceeds of sold securities versus donating securities in-kind. The marginal tax and tax credit rates are assumed to be 45% for illustration purposes.
| |
Sell Securites & Donate Cash |
Donate Securities |
| Value of Security/donation |
$10,000 |
$10,000 |
| Cost of Security |
$ 5,000 |
$ 5,000 |
| Taxable capital gain@50% |
$ 2,500 |
0 |
| Tax on gain @ 45% |
$ 1,250 |
0 |
| Tax credit at 45% |
$ 4,500 |
$ 4,500 |
| Net tax savings |
$ 3,375 |
$5,625 |
The length of time to process is dependent on the donor’s broker or investment advisor (typically 1-3 days). It is the policy of The Oshawa Hospital Foundation to sell donated securities immediately upon receipt.
Click Here to download the Gift of Securities Form