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Donating Publicly Held Securities

September 27, 2013

Perhaps you have some shares in your Safety Deposit Box that were provided to you when the life insurance company that you had a policy with demutualized or you worked for a company that provided shares. Maybe you have a brokerage account where your shares or mutual funds have accumulated capital gains. You can donate these shares to your favorite charity and by doing so eliminate capital gains and obtain a full contribution receipt for the value of the securities.

Below are two scenarios to illustrate how it works:

Sell securities and then donate net value to charity:   Transfer securities to charity and then have the charity sell securities:
Sale price of security  $10,000 $10,000
Original purchase price $2,000  $2,000
Capital Gain $8,000 Capital gain eliminated
 ½ Capital Gain is taxable $4,000 No tax payable
Tax payable (39%*)  $1,560 No tax payable
Net proceeds to donate $8,440 $10,000

 Tax credit (50%**)



*Top marginal tax rate in Alberta
**Combined federal and provincial tax credit for Alberta. Assumes sufficient taxable income.

In addition to being able to provide $1,560 more to charity, by transferring the securities to a charity would result in $2,340 more in tax savings over selling the securities first. Some clarification: publicly-held securities are bonds, stocks and mutual funds and for this example are held outside of a registered plan such as an RRSP or TFSA. The charity you wish to donate the shares to needs to have a brokerage account to facilitate this.

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