A donation of shares or equity mutual fund shares is the most efficient way to give charitably.
The Canada Revenue Agency does not apply capital gains tax on donations of publicly traded securities.
(Capital gains are the increase in the value of your securities over the price you paid at purchase.)
When you sell your shares for cash, you are responsible for the tax due on the gain, even if you plan to donate the proceeds from the sale. If you pay the tax out of those proceeds, there’s less money left to donate. Your preferred charity receives a smaller donation and you have a smaller donation to claim for your charitable tax credit at the end of the year.
But when you donate your securities directly to the Shuswap Community Foundation, those capital gains aren’t subject to tax. This means the Foundation receives a larger gift, and you benefit from a tax receipt for the full value of your eligible securities or equity mutual funds.
The Benefits: Give More, Save More.
Let’s say you purchased common shares in ABC Company for a cost of $1,000. If the current market value of those shares has increased to $5,000, you would have a capital gain of $4,000.
If you sell those shares and donate the cash proceeds, you’ll owe tax on the capital gain. So, you set aside the taxes due from the proceeds, leaving you with less than the full cash value to donate, and a tax receipt which reflects the smaller donation.
But when you donate the shares directly, you owe no capital gains tax and you’re able to donate the full value. So, the Foundation gets a larger donation and you get a tax receipt which reflects your larger contribution.