Remember the Ikea TV commercial from a couple of years ago which
showed a shopper heading anxiously to her car and urging her
husband to "START THE CAR!"? The ad was playing on that
idea that Ikea's prices were so low that, when you shopped
there, you felt like you were paying less than you were supposed
Wouldn't it be nice to get that feeling when you were
dealing with the Canada Revenue Agency? If you own public
company shares that have appreciated in value, there is a way to
get that feeling and make a contribution to your community at the
The Canada Revenue Agency allows taxpayers who donate public
company shares to a registered Canadian charity to do so without
first paying capital gains tax on the disposal of the shares.
The math is fairly simple and quite compelling.
Suppose you are a resident of British Columbia, at the top
marginal tax rate of 45.8% (2015) and wanted to donate $50,000 to
your favorite charitable organization.
You were fortunate enough to buy shares of a major Canadian bank
back in early 2009, just after the economy cratered in the Fall of
2008. You bought 625 bank shares at $35 per share and by November
2015 they were trading for $80 per share.
You could either sell the shares and donate $50,000 cash to a
charity or donate $50,000 worth of shares to the charity.
In the case illustrated below, donating the shares rather than
making a cash donation would put an additional $6,441 in your
pocket (being the capital gains tax saved). The government would be
covering you for 45.8% of the donation. Maybe not quite like
getting a kitchen table and chairs for $125, but impressive none
The results are even more impressive, the higher the inherent
gain on the donated shares, meaning you should choose wisely which
shares to donate. Also, even if you still want to hold shares of a
particular company in your portfolio, you should still consider
donating them instead of a cash donation. You could simply
repurchase replacement shares on the open market with the cash not
donated, and by doing so the inherent capital gain on your shares
can effectively be eliminated.
Recent proposed tax changes will introduce a similar opportunity
upon the gift of cash proceeds following the sale of private
company shares in certain cases.
Of course everyone's personal circumstances differ so
professional advice should be obtained before you make a donation
of public company shares to a charity. You will also need to
confirm that the charity is properly registered and is able to
accept the shares you are planning to donate. For more information
please contact your local Crowe MacKay advisor.
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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