What are gifts of securities?
To encourage charitable giving, the government provides you with a tax credit when you donate to a registered charity. This donation tax credit can be used to reduce your taxes payable. But, did you know that a further tax benefit is provided if you donate certain securities in-kind?
Gifts of securities include:
- Shares listed on a designated stock exchange;
- Mutual funds;
- Interest in related segregated funds; or
- Government of Canada or provincial government bonds.
Gifts can be given during your lifetime or after, though your estate.
What are the advantages of donating securities?
Making charitable donations provides individuals with a chance to give back to their community and receive tax incentives at the same time.
When you donate publicly traded securities, in addition to getting a donation tax receipt for the fair market value of the securities donated, any capital gains you have accrued on the donated securities may also be eliminated.
If you plan on donating, have your advisor review your portfolio to determine if there are any securities with large capital gains. Speak with your qualified tax advisor to determine whether it makes sense for you to donate securities with accrued capital gains.
Here is an example of how it works:
|Sell securities and donate the cash proceeds to LMH Foundation||Donate securities directly to LMH Foundation|
|Fair Market Value of donation (a)||$50,000||$50,000|
|Adjusted cost base||$10,000||$10,000|
|Taxable capital gain||$20,000||$0|
|Tax on capital gain @46% (b)||$9,200||$0|
|Tax savings from donation tax credit (c)||$23,000||$32,000|
|Total cost of donation = (a) + (b) – (c)||$36,200||$27,000|
|These are general figures for the purpose of illustration and do not constitute legal or financial advice. We encourage you to seek professional legal and/or financial advice before deciding on your donation to charity of the capital gain.|
This example illustrates the combined tax savings by comparing two alternatives for donating securities with a fair market value of $50,000 and an adjusted cost base of $10,000. The donor’s combined federal and provincial marginal tax rate is 46% and the donor is also entitled to a combined federal and provincial donation tax credit at a rate of 46%.
How can I donate securities to LMH Foundation?
Donating securities is not a complicated process.
- Consult your financial advisor to determine your options;
- Complete the Donation of Publicly Traded Securities Form (PDF) and submit to your financial advisor to initiate the transfer. This document will also be used to inform LMH Foundation’s professional advisor, RBC Dominion Securities, of the imminent transfer;
- Notify LMH Foundation of your gift by sending us a copy of the completed form as soon as possible. Email firstname.lastname@example.org
For more information on gifts of securities, or gifts in your Will, please contact:
Antonietta (Toni) Andreola, Donor Advisor