Are There Benefits to Gifting Publicly Traded Securities to a Charity?
If you own publicly traded securities (stocks, bonds, or mutual funds), outside of a registered account (RRSP, RRIF, TFSA), you may be wondering if there is a benefit to gifting them.
In the scenario where the securities have increased in value since you purchased them, donating them in-kind to charity will result in a more lucrative tax savings than you would have received with a cash gift.
By selling the securities, 50% of the capital gain will be taxable income. On the other hand, by donating the securities in-kind, the taxable capital gain can be avoided, and you will also receive a charitable receipt for the market value of the securities on the day you initiate the transfer to the charity.
An illustrative example of the tax advantages of donating securities to charity:
| Sell securities and donate after tax cash | Donate securities directly as gift in-kind | ||
| Market Value of Securities | $50,000 | $50,000 | |
| Adjusted Cost Base | ($10,000) | ($10,000) | |
| Capital Gain | $40,000 | $40,000 | |
| Taxable Capital Gain | $20,000 (50%) | $0 (0%) | |
| Marginal Tax Rate (example) | 40% | 40% | |
| Tax Payable | $8,000 | $0 | |
| After Tax Amount to Donate | $42,000 | $50,000 | Charity gets $8,000 more |
| Charitable Tax Credit (at approximately 44%) | $18,480 | $22,000 | Personal donation tax credit is $3,520 higher |
In this illustrative example, when the securities are donated directly to the charity as a gift in-kind the donor does not realize a taxable capital gain, saving the donor $8,000 in tax payable. The $50,000 donation receipt can then be used to offset other income tax payable.
If you are considering gifting your publicly traded securities to a charity but need further guidance or assistance, I’d be pleased to assist.
About the Author
Amanda Pyper
Amanda has extensive experience with not-for-profit enterprises, including knowledge of reporting issues and disclosures particular to large and small organizations.
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