Gifts of Publicly-traded Securities to Charity

There are tax advantages in Canada to donating publicly-traded securities (investments traded on a stock market) to a charity instead of cash, if the donated securities have increased in value.

When you give cash or securities to a Canadian registered charity, you are eligible for a tax credit.

But in the case of a publicly-traded security, you can also take advantage to a change introduced in the February 2006 Federal Budget eliminating capital gains tax on publicly-traded shares donated to a registered charity.

The normal rule is that if you sell securities at a profit, you are required to pay capital gains tax on the increase in value over your cost. Fifty percent of the gain is included in your income for the purpose of calculating your Canadian income tax.

Before the February 2006 Budget, gifts of publicly-traded security to charities were given favourable treatment, including a 25% inclusion rate (instead of 50%). But now, the capital gains tax has been eliminated for qualifying gifts.

Accordingly, you are much better off giving publicly-traded shares to a registered charity, than if you sold the shares--and paid the capital gains tax--and then gave the cash proceeds to the charity.