Stocks and Bonds

Seeing your stock, bond or mutual fund grow should be pleasing. Unfortunately, when you cash in any of these forms of investments they become a form of taxable income. You can minimize the financial impact this will have while benefiting from tremendous tax incentives recently introduced by the Federal Government by donating your publicly listed security directly to The Foundation of Guelph General Hospital.

Giving Reduces Capital Gains Tax

Prior to the budget change brought down on May 2, 2006, gifts of appreciated securities made to charities, excluding private foundations, had a reduced capital gain tax rate of 25%. While the donor receives a receipt credit based on the full market value of their security, they were still required to report 25% of the gain.

The new tax change means there is no capital gain to be paid!

Now, when donating a gift of securities directly to a charitable organization such The Foundation, the entire capital gain is eliminated. This means that there is no need to calculate the reportable capital gain and the tax credit the gift triggers can be used to offset other income tax that you may be obligated to pay.

The types of investments that qualify include: shares, bills, warrants, mutual funds and futures, listed on stock exchanges. Also included are both RRSPs and pension plan benefits.

Making a Gift

Making a gift of securities to The Foundation is very easy.  For example, Mr. J. Smith purchased ABC Company stock some years ago.  The stock has a Fair Market Value (FMV) of $10,000 and his cost was $2,000. He has made recent charitable donations to The Foundation and has decided that he would like to make a substantial gift of support. When looking at his stock portfolio, he decided to give his ABC Company stocks as a gift to The Foundation. His combined federal and provincial tax rate and charitable tax credit are both 50%. Here is an example of the real cost of giving the stock instead of selling the stock and donating the cash:

Tips on donating PLSs

The elimination of capital gains will apply only if the security is given directly to the charity.
The fair market value of your security is based on the closing market price on the day that it is given. That day is not always easy to determine. You may believe it is the day you signed the certificate on your stock. The charity may view it as the day they received your gift in the mail.

People want to invest their money wisely and it only makes sense to take the same care to decrease the impact of taxes. The tax incentives for donating securities have increased but to decide whether a security is your best donation option, seek financial advice.

For more information please contact us by calling us at 519-837-6422 or by email at foundation@gghorg.ca.

To download a securities transfer form, click here.