It is gratifying to give back to your community. You can do so in a more significant way than ever before, while reducing your capital gains taxes, by talking to us about donating stocks directly to your favourite registered charity.

Here’s how it works. When you donate stock, you receive a charitable tax receipt:

• The value of your donation is based on the stock’s closing price the day it is received by the charity.
• A percentage of the donation becomes a non-refundable tax credit, which lowers your taxes that year.
• Charitable tax credits can also be used in the future. If you wish, you can spread out your tax savings over five years.

You pay no capital gains tax on the appreciation of the stocks:

• Capital gains taxes are no longer charged on shares donated to registered charities.

This example illustrates how you can save thousands of dollars in taxes by donating shares directly to a charity:

Sell Securities and Donate Gross Proceeds Donate Securities Value of donation (A) $2,000 $2,000 Cost base (B) $1,000 $1,000 Capital gain (A – B = C) $1,000 $1,000 Capital gain inclusion rate (D) 50% $0 Taxable capital gain (C x D = E) $500 $0 Tax on taxable capital gain (E x 46%) ($230) $0 Donation tax credit (A x 46%) $920 $920 Net tax savings (S) $690 $920 Net after-tax cost of donation (A – S) $1,310 $1,080 Source: KPMG Canada, TaxNewsFlash-Canada 06-26, July 28, 2006.

By directly donating stock, you give your charity and yourself a considerable advantage. Best of all, The Stovel Investment Group* will facilitate the entire process so it is effortless for you.

 
The information provided above is for illustrative purposes only. Please consult your financial or legal advisor for tax-effective giving that is right for you.