No Fear – Just Philanthropy

Sally was afraid it would be too complicated for her corporation to donate publicly traded securities until a Generosity Plan™ made charitable giving tax efficient and easy.

Sally* is the sole shareholder of a holding company with an investment portfolio of publicly traded securities. She believes strongly in corporate social responsibility and every year her holding company gives cash donations to a variety of different charities. When her accountant suggested donating publicly traded securities instead of cash, Sally feared it would be too complicated and opted to continue giving the way she always had. That decision meant her holding company missed out on some significant tax and Capital Dividend Account (CDA) benefits. 

Advantages of Charitable Giving for Business Owners 

When a corporation donates publicly traded securities (stocks, bonds, or mutual funds) to a Canadian charity or qualified donee, the capital gains inclusion rate drops from 50% to 0%. This means the corporation avoids the capital gains tax that would be due if it sold the securities and donated the cash proceeds. In addition, the tax-free portion of a capital gain is added to the corporation’s Capital Dividend Account (CDA). Since the entire capital gain on donated publicly traded securities is tax-free, it is added to the CDA. A positive balance in the CDA can be paid out to shareholders as a tax-free dividend. This giving strategy works particularly well for closely held corporations like Sally’s because the corporation requires shareholder agreement to make the donation. 

The following tax year, Sally’s accountant suggested she meet with a gift planning consultant at Abundance Canada to learn more about her gifting options.

Flexible, Tax-Efficient Philanthropy 

Sally and I met to discuss her philanthropic goals and the most strategic ways to achieve them. She was surprised to learn that donating securities from her corporation to Abundance Canada wasn’t a complicated process. In fact, it was as easy as signing a transfer form!

Sally’s corporation donated in-kind publicly traded securities to Abundance Canada. Abundance Canada sold the securities at market value, and the cash proceeds were added to her Gifting Fund™. She appreciated being able to make a significant donation before her corporation’s year end, and defer the decision on which charities to support into the next fiscal year and beyond.

Strategic Generosity is Easier Than You Think 

Sally couldn’t believe the tax efficiency of this gifting strategy. “Oh, my goodness, this almost seems too good to be true,” Sally exclaimed upon meeting me later that Spring. “I’m just sorry I didn’t listen to my accountants sooner.”

Does your corporation own publicly traded securities? Contact Abundance Canada to see if donating them could be a strategic part of your philanthropic goals.

*Pseudonym 

Contributed by Marlow Gingerich
Gift Planning Consultant  

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