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Donations of Marketable Securities


Do you want to support a favorite Canadian registered charity but find yourself short on cash? Do you have shares in a public company that have appreciated in value? One option you have available is to sell the shares and donate the cash to the charity. Only one-half of the capital gain you realize will be included in your income and you’ll get a tax credit (for donations up to 75% of your net income). Any donation amount that cannot be used in the year is carried forward for 5 years. In B.C. for example, the tax credit is 20.06% on the first $200 of donations and 43.7% on any donations made in excess of $200.

That sounds like a pretty good deal, but can you do better? Well actually, you can. If you donate marketable securities to a charity, you do not have to include any realized capital gain in your income and you still get a tax credit based on the market value of the securities when you donate them. This can be very attractive, as that donation credit will then be applied against the tax on all of your other income.

How do the two options compare? Let’s assume you have shares that you paid $50,000 for and which are now worth $100,000. For the purpose of the comparison, we’ll also assume you are in the top income tax bracket in B.C. (which starts at about $129,000) and to keep the comparison simple, we’ll also ignore the lower rate on the first $200 of donations.

By donating the shares directly, you are $10,925 further ahead. That sounds like an even better deal.

Sell shares and donate cash Donate shares directly Capital gain on share sale $50,000 Capital gain on share sale Nil Taxable capital gain $25,000 Taxable capital gain Nil Tax on capital gain $10,925 Tax on capital gain Nil Tax savings on donation $43,700 Tax savings on donation $43,700 Net tax savings $32,775 Net tax savings $43,700

For more information on tax credits regarding donations and how these may vary between provinces, please contact your local MNP Tax advisor.