Donating Securities
Depending on your personal circumstances, another tax efficient way to give is through a gift of publicly traded securities.
Securities are also frequently referred to as stocks, shares, mutual funds or exchange traded funds (ETFs). For example, common securities donated by Islanders to the QEH Foundation include Fortis, BCE and also several of Canada’s big banks.
Many of these securities have appreciated significantly, which will result in taxable capital gains when sold. By donating those securities directly to the QEH Foundation, you will eliminate capital gains tax.
You may have received free shares several years ago from a life insurance company because you owned an insurance policy. These are ideal securities to donate because their full value is treated as a capital gain, that you must claim as income when cashed.
Tax Benefit of Transferring Shares
The following summary illustrates the advantages of donating securities as opposed to selling securities and giving cash:
| Sell Shares & Donate Cash to the QEH | Transfer Shares directly to the QEH | |
|---|---|---|
| Value of Donation | $100,000 | $100,000 |
| Original Cost | $10,000 | $10,000 |
| Capital Gain | $90,000 | $90,000 |
| Taxable Capital Gain | $45,000 | $0 |
| Tax on Capital Gain | $21,317 | $0 |
| Donation Tax Credit | $47,370 | $47,370 |
| NET TAX SAVINGS | $26,053 | $47,370 |
Assumptions for above example:
- The donor wishes to make a gift of $100,000 of publicly-traded securities
- The donor’s total income is sufficient to claim the full donation.
- The adjusted cost base of the securities is $10,000.
- Marginal tax rate of 47.37% (PEI)
- The donor has other donations of at least $200.
If you plan to donate, consider securities with capital gains to save even more tax.
Securities left in your estate to children with taxable income will result in the tax on 50% of the gain. Securities left to the QEH Foundation will result in full charitable tax value and no capital gains.