Publicly Traded Securities: The Most Tax-Efficient Way to Donate
Donating publicly traded securities (stocks, bonds and mutual funds) is the most tax-efficient way to make charitable donations. When publicly traded 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 traded 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)|
|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
Download a copy of our Technical Information Sheet on Publicly Traded Securities here.
Contact Abundance Canada if you have clients who might benefit from donations of publicly traded securities.