The 2006 proposed Federal Budget made gifts of publicly-traded securities more tax-effective than ever before. All donations of marketable securities to registered charities are now totally exempt from capital gains tax.
Eligible donations include stocks, bonds and mutual funds listed on a public securities exchange such as the TSX. The donation must be a transfer of the stock itself, not a cash donation of the proceeds of sale of the stock.
This presents an outstanding opportunity for donors with appreciated stock portfolios to make substantial charitable gifts at reduced cost.
Stock Donation Form
Take, for example, a $10,000 donation of stock for which the donor paid $2,000 some time ago. The donor transfers the stock to charity and receives a receipt for $10,000. The receipt produces the usual tax credit of 46% or $4,600.
Normally, disposing of such highly-appreciated stock would result in a capital gain of $8,000 ($10,000 present value minus $2,000 cost). Since half of all capital gain is taxed as income, this would result in an additional $4,000 of taxable income and a tax bill of $1,840.
Under the previous donation rules, by donating the stock to a registered charity the donor would have saved half of this tax, or $920. Now the donor will save the entire $1,840 because there will be no tax due on the capital gain.
The result: the donor makes has turned an investment of $2,000 into a $10,000 donation for a favourite charity and a $4,600 tax credit for the benefit of the donor.
As you can see, the savings can be substantial. There is no minimum donation amount, and the transfer itself is quite straightforward.