Securities
In order to incentivize charitable giving, the tax on capital gains arising from the disposition of publicly traded securities donated directly to a registered charity has been fully eliminated. Instead of paying tax on 50% of the capital gains realized from the appreciation of the securities, on donation, no capital gains tax is due and a charitable tax receipt is issued for the full fair market value of the donated securities.
An example will demonstrate the value of giving securities as opposed to selling them first and donating the cash. Say an individual in a 35% tax bracket, has $25,000 in securities with $10,000 of unrecognized capital gains. He wants to use these securities to create an immediate gift for a charity. He could sell the securities, pay approximately $1,750 in capital gains tax and give the resultant $23,250 to charity or he could just give the $25,000 in securities directly to the charity and pay no capital gains tax. The choice is obvious. And that's not all; donating the securities directly will also create a larger charitable tax receipt.
Similar benefits accrue if you bequest securities to a charity from your estate. In this case, it is important that the wording of your Will gives your estate trustee (executor) the authority to fulfill a monetary charitable bequest direction with securities. Instead of selling securities to accumulate enough cash to meet the donation directive, as set out in the Will, it is by far more tax efficient to simply transfer ownership of the securities to the charity.
If you are planning to leave an immediate donation or a bequest to charity in your Will, please contact us and we'll evaluate whether the Securities donation strategy works the best for your circumstances. We'll help you make it happen to your best financial advantage.
