Gifts of Securities

Elimination of Capital Gains Tax on Gifts of Appreciated Securities

On May 2, 2006, Jim Flaherty 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 Conestoga College Institute of Technology and Advanced Learning.

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 Conestoga.

It is important to note that if you choose to sell appreciated securities during your lifetime, or if these assets are liquidated through your estate, tax must be paid on 50 per cent of the capital gains on those securities. This new provision provides an opportunity to eliminate a significant tax liability that would otherwise eventually have to be paid.

A gift of publicly traded securities can provide you with an unexpected means to make a significant contribution to Conestoga at a relatively low-cost to you. These recent changes mean that by making a gift of equities, bonds, and mutual fund units to Conestoga, your taxable capital gain is eliminated.

Advantages of Giving Gifts of Securities

• Conestoga will issue you a charitable tax receipt for the fair market value of the gift of securities to be used for tax purposes. The fair market value will be the closing price of the securities on the date the securities are received by Conestoga.
• By giving the securities directly to Conestoga, 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 Conestoga through your Will, your estate will receive the same tax benefits. Gifts made through your Will can be claimed up to 100 percent of your net annual income in the year of death and the year preceding. 

How it works

Consider the following example: Mr. Brown gives the College publicly traded securities that he bought for $15,000. The securities are now worth $25,000. The capital gain is $10,000. Mr. Brown’s assumed combined federal and provincial marginal tax rate is 45 percent.

* assumes combined marginal tax rate of 45 per cent
In summary, by donating $25,000 worth of appreciated securities to Conestoga, Mr. Brown has eliminated any capital gains tax and has saved an additional $1,125 in taxes owing.

Gifts through Employee Stock Options

The reduced capital gains tax rate also applies to donations of publicly traded shares acquired through employee stock options. Certain conditions apply and the shares must be donated to Conestoga within 30 days of the stock option being exercised.

Making Your Gift to Conestoga

Any gift of securities made now or through your Will should be done in consultation with your financial or tax advisors. If you have any questions about how this change can affect your contribution to Conestoga, please contact the Development Office.

Before you donate securities to Conestoga, make sure you contact Development Office  for information that you and your broker need to make giving securities easy and to discuss how you would like the proceeds from your gift to be used.