New tax rules open avenues for fund-raising

  • October 29, 2006

TORONTO - A gift of $15,000 is probably a lot easier to make if a $6,000 tax break goes along with it. That’s the new economics of giving stocks and bonds to charity, and it likely explains why the archdiocese of Toronto has received more donations of securities this year than in the last three years combined.

Starting in May, Ottawa eliminated capital gains taxes from the appreciated value of listed securities (shares, mutual funds, bonds) if they are donated directly to a registered charity.

Arthur Peters, the archdiocese of Toronto’s Office of Stewardship Development director, concedes the boom in gifts of shares still doesn’t amount to much. Securities have never been a significant portion of gifts to the archdiocese or to parishes, but Peters believes that may change.

“I can’t crystal ball, but I think that next year’s (ShareLife) campaign might see some more donations of shares to ShareLife at the onset of the campaign,” Peters told The Catholic Register.

The reason is the favourable tax treatment of gifts of securities. The potential locked up in appreciated securities is substantial. The market value of stock held by Canadians is about $1.3 trillion, and about half of that is in unrealized capital gains, according to TD Waterhouse Inc.

Under normal circumstances, an investor who cashes out shares, bonds or mutual funds can expect to pay capital gains taxes on 50 per cent of the appreciated value of the shares. In those circumstances, a lot of shares remain locked up waiting for a rainy day.

For a person in the 40.2-per-cent tax bracket, using a block of shares to make a contribution to ShareLife or to a parish building campaign will make a lot more sense than a cash donation. Imagine the donor bought the shares for $10,000 several years ago, and they’ve now grown in value to $15,000. If the stock were sold the donor would pay capital gains taxes of just over $500 on $1,250 — 50 per cent of the appreciated value of the stock. Plus there’s the $6,030 in income taxes payable on the full $15,000 addition to annual personal income.

The $15,000 gift of shares results in a $6,030 tax savings to the donor, plus now an extra $503 to the charity which would have been payable in capital gains taxes before the change in tax rules in the spring.

The archdiocese of Toronto wants to make it as easy as possible for people to take advantage of the new tax regime. The archdiocese pays all the brokerage fees on a gift of shares, and the relevant tax forms for making such a gift are available on the Office of Stewardship Development’s web site,

The office facilitates the process for donors whether they want to give to the archdiocese, ShareLife, the Shepherd’s Trust, St. Augustine’s Seminary or their own parish.

When a transfer of shares is complete, the archdiocese immediately sells the shares so the cash can be used for the charity.

“The prices of shares fluctuate. They could be there today, up today or down tomorrow. We capture the donor’s intention at the time that they make that donation,” said Peters.

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