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Biblical Stewardship

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%**)

$4,220

$5,000

*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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