Donating Shares Versus Selling and Donating Cash

The short answer: If you own publicly traded shares that have increased in value, donating the shares directly to the Association is generally more tax-efficient than selling them and donating the cash.

When qualifying shares are donated directly, you generally receive a charitable donation receipt for their full market value and do not pay tax on the increase in their value. This can allow you to provide the same support to the Association at a lower overall cost.

Two Ways to Make Your Gift

Option 1:  Sell the Shares and Donate the Cash

When shares are sold for more than their original cost, the increase in value is a capital gain. A portion of that gain is normally included in taxable income. You will receive a donation receipt for the cash given to the Association, but the donation does not eliminate the capital gain created by the sale.

Option 2: Donate the Shares Directly

Special tax treatment applies when qualifying publicly traded securities are donated directly to a registered charity. You generally pay no tax on the increase in value and receive a donation receipt based on the market value of the shares when they are received by the Association.

Qualifying investments generally include publicly traded shares, mutual fund units and certain other securities held in a non-registered investment account.

A Simple Example

Assume you would like to make a $10,000 gift using publicly traded shares that originally cost $4,000. The shares have increased in value by $6,000. For illustration, the comparison assumes that 50% of the capital gain is taxable and that the donor’s marginal tax rate is 50%.

	Donate Shares Directly	Sell Shares Then Donate Cash
Value donated to the Association	$10,000	$10,000
Original cost of the shares	$4,000	$4,000
Increase in value	$6,000	$6,000
Amount included in taxable income	$0	$3,000
Estimated tax on the gain	$0	$1,500
Charitable donation receipt	$10,000	$10,000

Result: In both cases, the Association receives $10,000 and the donor receives a $10,000 donation receipt. However, selling the shares first could create approximately $1,500 of additional tax in this example.

The Advantages and Considerations

Donating the Shares Directly

• Generally, eliminates tax on the increase in value.
• Provides a donation receipt for the full market value of the shares.
• Usually results in a lower overall tax cost.
• Requires advance coordination with the Association and your investment advisor.

Selling the Shares and Donating the Cash

• May be a more familiar process and allows the Association to receive cash directly.
• Provides a donation receipt for the cash donated.
• Creates a capital gain and generally results in a higher overall tax cost.

Other Points to Consider

Shares that have declined in value. It may be preferable to sell the shares, report the capital loss and donate the cash. Registered accounts. Shares held inside an RRSP, RRIF or TFSA do not receive the same capital gains treatment. Large gifts. Significant donations may have additional tax implications, including alternative minimum tax considerations.

Planning Your Gift

If you are considering a gift of securities, please contact the Association before starting the transfer. The Association can provide the required brokerage information. Please allow sufficient processing time, particularly near the end of the calendar year.

Tax results vary based on individual circumstances. Donors should consult a tax and investment advisor before making a gift of securities.

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Don d’actions ou vente d’actions suivie d’un don en argent

En bref : Si vous détenez des actions cotées en bourse dont la valeur a augmenté, faire don de ces actions directement à l’Association est généralement plus avantageux sur le plan fiscal que de les vendre et de faire un don en argent.

Lorsque vous faites un don d’actions admissibles, vous recevez un reçu officiel correspondant à leur valeur marchande totale et vous n’avez pas à payer d’impôt sur le gain en capital. De cette manière, vous offrez le même soutien à l’Association, mais à un coût global moindre.

Deux façons de faire un don

Option 1 : Vendre les actions et faire don du produit de la vente

Lorsque vous vendez des actions à un prix supérieur à leur coût d’acquisition, vous réalisez un gain en capital. Une partie de ce gain est normalement ajoutée à votre revenu imposable. Vous recevrez un reçu de don pour le montant remis en espèces à l’Association, mais ce don n’élimine pas le gain en capital résultant de la vente des actions.

Option 2 : Faire un don en actions

Des mesures fiscales particulières s’appliquent lorsque des actions cotées en bourse admissibles sont cédées directement à un organisme de charité enregistré. En règle générale, vous ne payez pas d’impôt sur le gain en capital et un reçu de don correspondant à la valeur marchande des actions vous sera émis au moment où l’Association en prendra possession.

Les placements admissibles comprennent généralement les actions cotées en bourse, les parts de fonds communs de placement et certains autres titres détenus dans un compte de placement non enregistré.

Un exemple

Supposons que vous souhaitez faire un don de 10 000 $ sous forme d’actions cotées en bourse dont le coût d’acquisition initial était de 4 000 $. La valeur des actions a augmenté de 6 000 $. Dans cet exemple, nous supposerons que 50 % du gain en capital est imposable et que le taux d’imposition marginal du donateur est de 50 %.

Vaive and Associates Professional Corporation Chartered Professional Accountants

Per:      Kevin Hughes, CPA, CGA, LPA  Partner

Email:   [email protected]

Tel:        613.369.5064 x5136

Direct:  613.695.5136

Fax:       613.695.7655