What it is:
Gifts of publicly traded securities are donations of stocks, bonds, or mutual funds. The Income Tax Act provides extra cash savings on capital gains for listed securities if they are transferred to a charity as a gift.
Benefits:
- a tax receipt for the fair market value of the gift
- exemption from the capital gains tax that typically applies to the sale of a security
How it Works:
- Choose the securities you wish to donate.
- Contact the charity of your choice.
- Transfer the securities to the charity’s brokerage account. Do not sell them or you will lose the potential tax savings of not paying capital gains tax.
Illustration:
|
Sell Security and Donate Cash |
Donate to a Charity |
|
| Market value of security |
$8,000 |
$8,000 |
| Original cost of the security |
$5,000 |
$5,000 |
| Capital gain |
$3,000 |
$3,000 |
| Taxable capital gain (50%) |
$1,500 |
$0 |
| Assumed tax rate (45%) |
$675 |
$0 |
| Value of tax receipt at 45% |
$3,600 |
$3,600 |
| Net tax savings |
$2,925 |
$3,600 |
Further Info:
If you are considering a gift of securities and would like more information, we recommend that you consult with a qualified accountant or financial planner.
If the charity you wish to donate to does not have a brokerage account or you would like to make an anonymous gift of securities consider using CCCC’s Community Trust Fund to facilitate your gift.