Generosity and Wise Financial Stewardship
A Surprising Discovery
Alice* stood in the doorway of the farmhouse she and her husband Henry had occupied for over 40 years. Cleaning out the clutter accumulated over decades of ownership was a daunting task. However, with Henry’s passing, she had decided to move. Now, imagine her surprise when, amongst the possessions and papers, she unearthed several share certificates Henry had tucked away for safekeeping. He had purchased them years earlier for $10,000. Alice was amazed to discover those shares were now worth $50,000. She decided to donate the unexpected windfall to charity in Henry’s honour.
Alice had never made such a large donation to charity, so a friend suggested she contact Abundance Canada for advice.Alice created a Generosity Plan™, which made it easy for her to recommend how the donation be divided among several of Henry’s favourite charities and donated the shares in-kind to Abundance Canada. Click To Tweet
Donating Shares In-Kind
In speaking with a gift planning consultant, Alice learned that if she sold the share certificates and donated the cash proceeds to charity, she would have to report a taxable capital gain of $20,000 ($50,000 sale, less $10,000 cost = $40,000 with a 50% inclusion rate). However, if she instead donated the shares directly to charity as a gift in kind, the charity would still receive a donation of $50,000, and Alice would not incur any taxable capital gain, thus, avoiding the tax altogether.
Alice created a Generosity Plan™, which made it easy for her to recommend how the donation be divided among several of Henry’s favourite charities and donated the shares in-kind to Abundance Canada. She also set up a distribution schedule to provide a bonus annual gift to each charity on top of her usual donations, extending the unexpected gift over a five-year period.
By donating the shares to Abundance Canada as a gift in-kind, Alice avoided the $20,000 taxable capital gain, she received a $50,000 charitable donation receipt, which will provide approximately $25,000 in tax credits. If Alice doesn’t need all of those credits to offset taxes from other income sources this year, she can carry them forward for up to five years.Alice’s gift in-kind honoured her husband with a legacy of generosity, maximized her tax efficiency, and provided several charities with much-needed donations. Click To Tweet
A Win-Win Solution
Alice’s gift in-kind honoured her husband with a legacy of generosity, maximized her tax efficiency, and provided several charities with much-needed donations. It was a win-win solution for Alice and for the charities she and Henry cared about.
A generous donation along with wise financial stewardship is always a winning combination.
Contributed by Peter Dryden
Gift Planning Consultant
* Pseudonym use to protect identity