Taking Stock of Your Donations
Capital gains: your tax-smart superpower
When most people think about donating to a charity, they often think of donating cash. But there are other ways to donate, ways that are beneficial to both the receiving charity and the donor.
One of those ways is by gifting qualified securities in-kind to the charity or foundation of choice. According to CRA, qualified securities can be shares, debt obligations or rights listed on a publically traded stock exchange, Mutual Funds, Exchange Traded Funds, interests in related segregated fund trusts, and Government of Canada or Provincial bonds.
To encourage charitable giving, the federal and provincial governments provide donors with a tax credit when they make a personal donation to a registered charity.
“This donation tax credit can be used to reduce federal and provincial income taxes in the year the claim is made. Donors are also able to carry forward any unclaimed donations for up to five years,” says Patrick Ng, investment advisor with RBC Dominion Securities, and the current Chair of the KGH Foundation’s Planned Giving Committee.
Another benefit that can have a large impact on a donor’s interest in using this strategy, is the elimination of any appreciation in value (or capital gain) of the gifted securities in question.
By donating the securities in-kind instead of selling beforehand and donating the cash proceeds, donors can take advantage of additional tax savings, and the potential to lower the costs of making a donation considerably. The tax savings can be upwards of 40 percent, with those funds staying in the community and making a difference for the charity.
When both of these tax benefits are coupled together, it “creates a win-win giving opportunity,” says Ng.
No matter what, Ng advises anyone considering a gift of securities to speak to their financial advisor and a qualified tax advisor to ensure this strategy is right for them.
With the end of the year approaching, and the winter holidays just around the corner, now is a good time for donors to consider reviewing their investments and determine if a gift of securities is something they would like to take advantage of before the end of the year.
A win-win in action
“The Interior Heart Surgical Centre campaign had begun. I had just retired. I was not sure what we would face for living expenses but wanted to support the campaign. I had a mutual fund that I knew would not be required in my retirement financial plan and decided to donate it to the KGH Foundation.”
As an investment advisor, Darrell Porubanec had advised many clients on how to preserve and accumulate family wealth while supporting the causes they care about. KGH Foundation’s Interior Heart Surgical Centre campaign in 2013 prompted Darrell’s decision to donate shares himself. He is a passionate champion of health care and, now Chair of the Board of Directors, is a loyal supporter of the work of the KGH Foundation.
Darrell’s mutual fund had a large appreciated value and donating it produced a significant Charitable Donation Tax Credit. This meant that the capital gains were not included in Darrell’s taxable income the year it was donated. He says, “I was able to give the full amount of the mutual fund, whereas the Foundation would have received less if I had chosen to sell the mutual fund and donate the proceeds. This is the power of giving a gift of securities.” Ultimately, Darrell’s gift to the Interior Heart Surgical Centre campaign contributed to reduced wait times for patients, quality improvements to healthcare and attracted new surgeons to Kelowna General Hospital.
For information about giving a gift of securities, call Colleen Cowman, Director of Planned Giving, 250-862-4300 ext. 7011.
Since 1978, the KGH Foundation has worked with a generous community to raise funds to support world-class health care close to home for a rapidly expanding and diverse population in the B.C. Interior. Today, the KGH Foundation is the lead fundraising organization for Kelowna General Hospital and its associated facilities, JoeAnna’s House and Central Okanagan Hospice House.
