The 2006 federal budget has eliminated the income taxes resulting from capital gains on publicly listed securities when they are donated to registered charities. Stocks, bonds, Canadian mutual funds units and interests in segregated (insurance) trusts all qualify for this incentive.
Previously, for donations of securities, the securities were considered to have been sold at fair market value and the capital gain was included in income. For gifts made prior to May 2, 2006, 25 per cent of the capital gain was required to be included in income.
Under the 2006 budget, which became effective May 2, 2006, the gain from the donation of eligible securities is reduced to zero.
By donating securities directly to a registered charity, you will pay no tax on the capital gain. If you sold the securities and then donated the proceeds, you would have to pay the tax on the capital. So, if you have the option, as a donor you should prefer gifting publicly listed securities to charities rather than donating cash because you will save having to pay the tax on the capital gain, which is a significant tax savings.
Louise Wilton, CMA