If your client owns shares of a Canadian Controlled Private Corporation (CCPC), there might be some benefits to donating those shares “in-kind” to Abundance Canada vs selling the shares and donating the cash proceeds.
While in-kind donations of publicly traded securities (stock, bonds and mutual funds) results in the capital gains inclusion rate dropping from 50% to 0%, the same tax eﬃciency does not apply for in-kind donations of private company shares.
However, there are still some benefits that might result from the in-kind donation of private company shares.
- There are complex rules that apply to the donation of private company shares.
- Private company shares are considered a non-qualifying security by CRA.
- The ability to issue a charitable receipt for the donation of private company shares will depend on whether the non-qualifying security is considered an excepted gift.
- A non-qualifying security is considered an excepted gift if it meets all the following criteria:
- It is in the form of a share.
- The charity receiving the gift is not a private foundation.
- The donor deals at arm’s length with each of the charity’s directors, oﬃcers, and like oﬃcials.
- If the private company shares are considered an excepted gift, the following tax planning benefits could be realized:
- Your client (the donor) could realize a taxable capital gain vs a taxable deemed dividend on the donation of the shares vs selling the shares and donating cash.
- When the corporation redeems the shares from Abundance Canada it could result in the corporation realizing a refund from its refundable dividend tax on hand (RDTOH) pool.
- There could be other potential implications on the redemption of the shares. Proper planning and professional tax advice should be sought out prior to initiating a donation of private company shares.
Established in 1974, Abundance Canada envisions a world where everyone lives generously, because we believe generosity changes everything™. To learn more about creating your Generosity Plan, contact Abundance Canada at 1.800.772.3257 to speak with a gift planning consultant. All consultations are confidential, with no obligations.