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Subject to reasonable limits, donors may gift
property to the Community Foundation of the North Okanagan
in a form other than cash.* This can offer a significant tax
advantage for a donor who wishes to avoid capital gains exposure
on the conversion of capital property to cash for gifting.
Recent changes to the treatment of capital gains
associated with gifts of appreciated capital property have
made this option even more attractive to prospective donors.
The changes introduced in the Federal Budget of 1996 set a
100% limit on the portion of a donation of appreciated property
that must be included in a donor’s taxable income. The
changes introduced by the Federal Government in October, 2000
allow individuals and corporations who donate shares and other
securities listed on prescribed stock exchanges to include
in their taxable income only 25% of the capital gain (instead
of 50%) arising on the disposition of the shares or securities.
This latter change is intended to provide a significant incentive
for donors contemplating gifts of marketable securities to
a charity.
Alternatively a provision of the Income Tax
Act still permits a donor to elect the tax value at which
the property is transferred to the Foundation. For example,
a donor holding a stock portfolio can transfer the portfolio
to the Foundation at its adjusted tax cost base, and, therefore
avoid triggering any capital gain at all. He or she will also
receive a tax receipt of the amount of the adjusted cost base
of the portfolio. The Foundation may well decide to liquidate
the portfolio the next day, but the Foundation does not pay
tax.
Changes introduced in the 1996 Federal Budget
also effectively eliminated the recapture of capital cost
allowance (CCA) on the gift of depreciable property. A donor
of depreciable property will now have sufficient tax credits
or deductions to offset the tax arising from the recapture
of CCA by further increasing the new net income limit of 75%
by an additional 25% of any CCA recapture arising from such
a donation. The donor will receive a tax receipt for the donation
of depreciated property that will shelter 100% of the recapture
of CCA.
In an appropriate case, The Community Foundation
of the North Okanagan can arrange for the donor to retain
the use of the donated real asset for his or her lifetime.
This will have some effect on the value of the receipt.
The reduced capital gains tax rate was extended
by the Federal Budget of 1997 for donations of shares acquired
through employee stock options. Again, the tax payable on
any capital gain that is triggered by such donations is half
the standard rate. To be eligible, the shares must be donated
to a charity within 30 days of the option being exercised.
The rules governing donations of publicly-traded shares will
apply. This new measure also applies to donations of units
in mutual trust funds that have been acquired under an employee
option plan.
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Handbook Index | Part
G »
Technical Reference
IT-110R3 Deductible gifts and official donation receipts
IT-288R2 Gifts of capital property to a charity and others
IT-297R2 Gifts in kind to charity and others
Canadian Centre for Philanthropy, March 1, 2000
* For example, we would be unlikely to accept
a gift of an operating business.
A donor receives a tax receipt for the market
value of the securities donated yet only brings into taxable
income 25% of the capital gain.
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