Gift of Securities: An Illustrative Example

If Mrs. Smith donates the shares directly to Little Flower Academy, she will reduce her income tax payable by $4,300. However, if she sells the shares first and donates the proceeds, she will reduce her income tax payable by $2,580 because she pays capital gains tax on the appreciation. Therefore, Mrs. Smith receives an additional reduction of $1,720 in income tax payable by making her donation as a gift of securities rather than selling the shares and giving cash.

	Sell your securities and donate the proceeds	Donate your securities in-kind
Amount of your donation	$10,000	$10,000
Initial cost of stock	$2,000	$2,000
Capital gain (FMV less cost)	$8,000	$8,000
Taxable gain	$4,000 (50%)	$0
Tax payable on gain (43%)	$1720	$0
Charitable gift receipt	$10,000	$10,000
Tax credit (43%)	$4300	$4300
Net tax benefit from donation	$2,580	$4300

The above illustration assumes that Mrs. Smith has made other charitable donations exceeding $200, is resident of British Columbia, has a combined marginal tax rate of approximately 43% and has donated eligible publicly traded securities.

We can help you realize your wish to support LFA by working with you and your financial and legal advisors. We recommend you discuss your gift intentions with your financial, legal or tax advisor.