DONATING SECURITIES

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The Federal Budget of May 2006 created a new incentive for gifting marketable securities to public charities by reducing capital gains tax on such gifts. As such, many individuals are turning their investments into gifts for charity.

To help our people understand the potential benefits of this incentive to both donors and HFLA, we have put together the following list of anticipated questions and answers about gifting securities:

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What securities can be gifted?

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Canadians are allowed to gift most publicly traded securities (stocks, bonds and mutual funds), RRSPs and RRIFs.

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Why donate securities?

When you sell a security that has increased in value since you acquired it, you typically have to pay tax on 50% of the capital gain. However, if you donate these securities directly to a charity, you can currently avoid paying capital gains tax when they are sold. This means you can potentially receive a larger tax credit by donating appreciated securities instead of selling them and donating the proceeds.

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How does this approach maximize my charitable impact?

By donating securities directly instead of selling them and then donating the cash proceeds, you maximize the value of your donation. This is because the full value of the securities are given to benefit the charitable organization.

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Do you have a chart illustrating how this works?

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Absolutely.

To follow is a chart for the purpose of illustration. Please note that it does not constitute legal or financial advice. We strongly encourage you to seek professional legal and/or financial advice before deciding upon your donation to charity.