People who own stocks, bonds or mutual funds are pleased when their investments have increased. Unfortunately, when such an investment is converted to cash the realized capital gain is taxable. You can decrease this financial impact by donating your publicly listed security directly to the MS Society of Canada.
Federal budget changes in 2006 have made donating publicly listed securities very attractive by eliminating the capital gains tax on such gifts as shares, bills, warrants, mutual funds and futures listed on stock exchanges.
Consider the following example of the real cost of donating stock versus selling it:
Making a gift of $10,000 in stock:Mr. MS Donor purchased stock in the ABC Company some years ago for $2,000 (otherwise known as the Adjusted Cost Base – ACB). The stock’s current Fair Market Value (FMV) is $10,000. Mr. MS Donor has decided that he would like to make a substantial gift of ABC Company stock to support the work of the organization. His combined federal and provincial tax rate and charitable tax credit are both 45%.
Option 1 — Sell the stock, then make a gift
Amount of gift
$10,000
Total gain (FMV-ACB) ($10,000-$2,000)
$8,000
Taxable gain (50% x $8,000)
$4,000
Tax on gain (45% x $4,000)
$1,800
Tax credit (45% x $10,000)
$4,500
Net credit (tax credit – tax on gain)
$2,700
Net cost (gift – net credit)
$7,300
Option 2 – Donate the stock
Amount of gift
$10,000
Total gain (FMV-ACB) ($10,000 - $2,000)
$ 8,000
Taxable gain (0% x $8,000)
$0
Tax on gain (0% x $4,000)
$0
Tax credit (45% x $10,000)
$4,500
Net credit (tax credit – tax on gain)
$4,500
Net cost (gift – net credit)
$5,500
Net advantage of donating stock
($7,300 - $5,500)
$1,800
Tax savings are $1,800 if Mr. MS Donor donates the stock instead of selling the stock and giving the cash proceeds.
Before deciding on any financial matters, it is best to seek out the advice of a professional financial planner.
For more information on making a gift of securities,
please contact Jill Smith at 1-866-922-6065 extension 2214 or jill.smith@mssociety.ca or contact your local office at 1-800-268-7582.
For individuals who are ready to make a gift
of securities, please download the Security
Transfer Form.
Once the form is completed, please forward a copy to your brokerage
as well as to the MS Society by fax, e-mail or mail:
