| Elimination of Capital Gains Tax on Gifts of Appreciated Securities On May 2, 2006, the Minister of Finance delivered the 2006 Federal budget.The Budget contained an important provision that has direct implications for donors who support registered charities, such as Groves Hospital Foundation. Effective immediately, the Federal Government announced the elimination of capital gains tax on gifts of publicly traded securities to registered charities. Under the old rules, donors were required to pay tax on 25 per cent of capital gains on these gifts. This new provision offers donors an opportunity to realize very significant tax savings when making a gift of appreciated securities to Groves. It is important to note that if you choose to sell appreciated during your lifetime, or if these assets are liquidated through your estate, tax must be paid on the 50 per cent of the capital gains on those securities. A gift of publicly traded securities can provide you with an unexpected means to make a significant contribution to Groves at a relatively low-cost to you. These changes mean that by making a gift of equities, bonds, and mutual fund units to Groves, your taxable capital gain is eliminated. Advantages of Giving Gifts of Securities • Groves will issue you a charitable tax receipt for the closing price of the securities on the date the securities are received by Groves for tax purposes. • By giving the securities directly to Groves, your taxable capital gain is eliminated. • If your donation exceeds the amount eligible for a tax credit in the year your gift is made, the excess credit may be carried forward up to five years. • If you leave securities to Groves through your Will, your estate will receive the same tax benefits. Gifts made through your Will can be claimed up to 100 per cent of your net annual income in the year of death and the year preceding. Here’s how it works Consider the following example: Mr. Smith gives Groves publicly traded securities that he bought for $15,000. The securities are now worth $25,000. The capital gain is $10,000. Mr. Smith’s assumed combined federal and provincial marginal tax rate is 45 per cent. .jpg) *assumes combined marginal tax rate of 45 per cent In summary, by donating $25,000 worth of appreciated securities to Groves, Mr. Smith has eliminated any capital gains tax and has saved an additional $1,125 in taxes owing. Making Your Gift to Groves Any gift of securities made now or through your Will should be done in consultation with your financial or tax advisors. Before you donate securities to Groves, make sure you contact your broker for information that you and he need to make giving securities easy. It is also important for us to know if you wish to be recognized for your contribution or prefer to remain anonymous. Please feel confident that any request for anonymity will be strictly honoured. |
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