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BMO Financial Group

December 24, 2010 09:00 ET

REPEAT-Charitable Giving: This Holiday Season, Skip the Traditional Route and Stretch Your Dollars

BMO Suggests that Canadians Give the Gift of Securities and Benefit Come Tax Time

TORONTO, ONTARIO--(Marketwire - Dec. 24, 2010) - As 2010 winds down, many Canadians are making charitable donations before the end of the year. While the most traditional way to donate to charitable organizations is by way of cash, there is an alternative option that can benefit investors come tax time.

"One of the most tax-efficient ways to contribute is by donating securities," said Marvi Ricker, Vice President & Managing Director, BMO Harris Private Banking. "Donating stocks directly to a charitable organization can maximize your tax savings because the taxable capital gain is completely eliminated."

Donating gifts of securities offer the following benefits:

  • Canadians who traditionally sell a security that has grown in value will usually pay tax on 50 per cent of the capital gain.
  • Alternatively, if one donates shares to a charity, they become exempt from any capital gains tax that usually applies to the sale of a security. 
  • Investors will also receive a tax receipt for the fair market value of the donation in the amount of the closing trade price on the day the charity receives the gift.

"This is a fast, simple and convenient way to make a difference and support a cause that you believe in," said Ms. Ricker. "As many Canadians look to participate in charitable giving, several organizations, such as United Way/Centraide and other local community foundations, have made this alternative giving option available to investors looking to support great causes." 

Donating Securities Instead Of Cash-How The Numbers Break Down:
*Example uses Ontario federal and provincial combined tax rate

The benefits of donating a gift of securities to United Way are two-fold. First, you will receive a tax receipt for the fair market value of the donation in the amount of the closing trading price on the day United Way receives the security. Second, your donation is exempt from the capital gains tax that typically applies to the sale of a security.

  Option 1: Sell security
and give cash
Option 2: Donate security
"in kind"
Market value of security $10,000 $10,000
Cost base $5,000 $5,000
Capital gain $5,000 $5,000
Taxable capital gain (50%) $2,500 $0
Tax due on gain at 46% $1,150 $0
Tax receipt for gift $10,000 $10,000
Value of tax receipt at 46% $4,600 $4,600
Net tax savings $3,450 $4,600

To donate securities to United Way please visit: http://www.unitedwaytoronto.com/giving/gift-of-securities.php

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