If you own securities that have substantially appreciated in value, consider donating some of them to your chosen charity instead of cash. Gifting qualifying securities can result in greater tax relief compared to donating cash. When you donate qualifying securities, you are able to claim a charitable donation for the securities’ fair market value on the date of the donation in addition to forgoing the deemed capital gain on the disposition of the securities.
Capital gains are the profits that result from the sale or deemed disposition of a capital asset where the fair market value is higher than your adjusted cost base. When you gift securities you are deemed to have sold them at fair market value. This triggers a deemed capital gain which is normally taxed. However, by gifting your appreciated securities under this tax treatment, you avoid having to pay any tax on the deemed capital gains due to the special inclusion rate of zero on qualifying transactions.
Keep in mind that if you sell the securities and then donate the cash, you are not afforded the same tax treatment on the capital gains. If you are considering donating qualifying securities to take advantage of the additional tax benefits, be sure to transfer them directly to your registered charity of choice
If you would like more information on this tax treatment or need help navigating the rules, feel free to contact GB Pilley & Associates Ltd., Chartered Professional Accountants at 604 926 3522.