Publicly Listed Securities: The Most Tax-Efficient Way to Donate
Donating publicly listed securities (stocks, bonds and mutual funds) is the most tax-efficient way to make charitable donations. When publicly listed securities are donated “in-kind” to a Canadian charity like Abundance Canada, the capital gains inclusion rate drops from 50% to 0%.
If your client donates the securities from within their corporation, they will realize an additional benefit; the tax-free portion of the capital gain is added to the corporation’s Capital Dividend Account (CDA).
When a corporation donates publicly listed securities, the entire capital gain is tax-free, so 100% of the capital gain is added to the CDA. A positive balance in the CDA can be paid out to shareholders as a tax-free dividend.
Example of the Tax Advantage for a Donation of Securities to Charity by a Corporation
| Sell securities and donate cash | Donate securities as gift in-kind | |
|---|---|---|
| Donation to charity | $50,000 | $50,000 |
| Adjusted Cost Base | ($10,000) | ($10,000) |
| Capital Gain | $40,000 | $40,000 |
| Taxable Capital Gain | $20,000 (50%) | $0 (0%) |
| Increase in the CDA | $20,000 (50%) | $40,000 (100%) |
Tax Planning Tips
- Eliminate the taxable capital gain on the donated securities
- Receive a donation receipt for the fair market value of the securities
- 100% of the capital gain is added to the CDA
Our Fee Model Policy is available here https://abundance.ca/about/legal/
Next Steps
Call us at 1 (800) 772-3257 or contact us online if you have clients who might benefit from donations of publicly listed securities.
Forms
To initiate an in-kind gift of securities please visit our Forms page to download and complete the Gift in Kind Donation Form.