Giving securities is often a better alternative than a gift of cash. You may have a portfolio of listed stocks or mutual funds that have increased significantly in value since you purchased them. It may be more advantageous for you to make your charitable gifts with these assets and keep your cash.
Gifts of appreciated securities are very appealing today. Donors are taking advantage of the tax benefits provided for gifts of qualifying securities to public charities. These include bonds, shares, bills, warrants, mutual funds, and futures traded on approved stock exchanges. Using a gift of securities, donors can eliminate the taxable portion of their capital gain and receive a tax receipt for the fair market value of the securities on the day the organization receives them.
Donors holding highly appreciated securities and wishing to make an outright gift to the Caledonia Fair should consider giving these assets, rather than cash, resulting in them being able to make a larger gift at a lower cost. When donors decide to make a gift of securities, it is important that someone from the organization be involved. We are able to provide donors with the procedures and documents needed to make such a transfer.
Caledonia Fair's brokerage firm will work with the donor and/or their financial representative to determine the best option for the individual and help guide him/her through the steps of the gifting of securities process. As with any donation to the Caledonia Fair, donors may choose to designate or leave the gift unrestricted.
Giving securities offers many immediate tax advantages. When a donor transfers securities to the organization, they will be entitled to a gift receipt for the fair market value of the securities on the day the legal transfer to the Fair occurs. If a donor gifts stocks, bonds and mutual funds to the Fair, they do not pay capital gains tax on their increase in value. This is 100% of the regular capital gains rate. When you combine this with your charitable tax credit, the savings clearly are significant. Donors are therefore able to claim donations up to 75% of net income, plus 100% of any taxable capital gain.
Mrs. Smith wishes to donate $100,000 towards Caledonia Fair's building campaign. She holds securities valued at $100,000, which she purchased ten years ago for $30,000. This means she will have a capital gain of $70,000. Immediately, Mrs. Smith is eligible for a gift receipt for $100,000. Further, since she is gifting the securities directly to the Caledonia Fair, she doesn't pay tax on the capital gain.
If Mrs. Smith had sold the securities and donated the proceeds, she would have been taxed on $35,000 (50% X $70,000) of the capital gain. If Mrs. Smith's combined federal and provincial tax rate is 50%, her after tax proceeds would be $82,500.
Information in this document does not constitute legal or financial advice and should not be relied upon as a substitute for professional advice. You should always seek professional legal, estate planning, and financial advice before deciding on the course of action that is best for you.
For more information please contact:
Jones & Associates Consulting Group