Gifts of Securities

Changes announced in the 2006 Federal Budget make it much more attractive to donate gifts of stocks, bonds, mutual funds, bills, futures and other publicly traded securities to Gillian’s Place.

In 2006 the Federal Government eliminated capital gains on all gifts of publicly traded securities to public charities, including Gillian’s Place. Note that the donation must be an “in-kind” transfer of the security itself, not the cash proceeds from the sale of the security. Such a transfer is easily made electronically from your investment account to Gillian’s Place brokerage account.

Gillian’s Place will issue a tax receipt for the market value of the gift within 30 days of receiving your security donation in Gillian’s Place brokerage account.

Individuals who wish to donate shares acquired through an employee stock option plan of a publicly traded company also receive favourable tax treatment. You may make a gift of proceeds of an exercise without incurring capital gains if the shares are donated within 30 days of exercise. Tax must be paid on the non-gift portion at the regular capital gains inclusion rate of 50%.

Why donate securities?

The federal capital gains tax has been eliminated on any publicly-traded equities (i.e. stocks, bonds, mutual funds, bills, futures and warrants) that are donated “in-kind”.

You increase your current after-tax cash flow.

If you have appreciated stock and charitable intent, you may wish to use this new incentive to receive the satisfaction of contributing a significant gift which will benefit Gillian’s Place.

The following example will illustrate the benefits of donating stock to Gillian’s Place versus selling the stock and keeping the proceeds:

 Sell Stock &
Keep Proceeds
Donate stock to
Gillian's Place
Fair market value of stock $40, 000 $40,000
Cost basis $8,000 $8,000
Donor's income $80,000 $80, 000
Taxable capital gains realized $16,000 (50%) $0
Net annual income $96,000 $80,000
Total tax due (assumes 50% tax bracket) $48,000 $40,000
Amount of donation receipt n/a $40,000
Value of tax credit (assumes 50% tax credit) n/a $20,000
Tax due after value of tax credits from gift $48,000 $20,000
Tax savings by making a gift $0 $20,000
After-tax proceeds $72,000 $60,000
Cost to make $40,000 gift of stock n/a $20,000
Income tax and tax savings are approximate.    

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