Making a Donation of Stocks, Securities or Mutual Funds
You may have securities that are underperforming but you are hesitant to sell because you do not want to pay tax on the capital gain. Federal budget changes in 2006 have made donating publicly listed securities very attractive by eliminating the capital gains tax on such gifts as shares, T-bills, warrants, mutual funds and futures listed on stock exchanges.
By making a donation of securities to the Canadian Liver Foundation (CLF), you can avoid paying taxes on the capital gain and greatly reduce your out-of-pocket expense for making this kind of donation.
For example: CLF Donor purchased stock in the ABC Company a number of years ago for $2,000 (Adjusted Cost Base – ACB). The stock’s current Fair Market Value (FMV) is $5,000. CLF Donor has decided that he would like to make a donation of ABC Company stock to support the work of the Canadian Liver Foundation. His combined federal and provincial tax rate and charitable tax credit are both 45%.
Amount of donation of stocks = $5,000
Total gain (FMV-ACB) (investment income) ($5,000 - $2,000) = $ 3,000
Taxable gain (0% x $3,000) = $0
Tax on gain (0% x $1,500) = $0
Tax credit (45% x $5,000) = $2,250
Net credit (tax credit – tax on gain) ($2,250 - $0) = $2,250
Net cost (gift – net credit) ($5,000 - $2,250) = $2,750
It only costs CLF Donor $2,750 to make a donation of $5,000 in securities.
How do I make a donation of stocks or securities?
Consult your broker or investment advisor and complete the enclosed form and fax to the CLF and our broker. The policy of The Canadian Liver Foundation to sell any donated securities at the first available opportunity. A receipt will be issued to the donor for the fair market value of the security on the date it is sold. The gift will not qualify for the reduced capital gain if the shares are sold and the cash then gifted to the CLF.
Seek Expert Advice
If you are thinking about transferring assets that have appreciated in value, you should seek expert advice from a tax specialist or your broker. The Canadian Liver Foundation strongly recommends professional advice to ensure that your financial goals are considered, your tax situation reviewed and your planned gift is tailored to your circumstances.
