Giving Appreciated Securities

Canadians have a wonderful opportunity to gift securities while completely eliminating the associated capital gains taxes on the sale of these assets. In the usual situation, 50% of the capital gain must be treated as taxable income. However, if publicly traded shares are donated to a public foundation like Provident Foundation, then none of the capital gain will be treated as taxable income.

When non-cash gifts are given to a public foundation such as Provident, Canadian tax law deems that the donor has disposed of the property at the time of the donation. The donor may have a capital gain on the property if its value at the time of donation exceeds its value at the time the donor acquired it, but when transferred 'in kind' to Provident, the taxes on such capital gains are completely eliminated.

Additionally, a growing number of Canadians know that they can donate employee options to decrease their tax burden. Options are taxed at the same rate as capital gains but are considered income. By donating options, the donor eliminates all the tax on the option benefit (the difference between the strike price and the exercised price). To receive the tax deduction, clients must donate the option within the same calendar year as it was exercised. It must also be donated within 30 days of being exercised.

How it works:

  1. Complete the Direct Transfer Form with your financial advisor for their action or send it to your account holder. Provide Provident with a copy.
  2. Complete the Letter of Direction for Direct Transfers to indicate to Provident how you wish to have the proceeds of this sale distributed. Provide it directly to Provident.
  3. Provident will inform you once our broker has received the securities and a donation receipt will be issued representing the value of the asset on the date of transfer.
  4. Provident will prepare cheques and make the distribution to your chosen charities, including your personal contact information if that is your choice. Gifts can also be made anonymously. Copies of cheques and all correspondence will be sent to you.

Contact us if you would like more information. Provident is here to serve you.