Capital Property

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These kinds of gifts are a transfer of real or personal property to a charity. They include stocks, bonds, mutual fund units, land, property, coin and stamp collections, etc.

Government regulations stipulate that the fair market value of the gift be used for valuation purposes. In the case of publicly traded securities, such as stocks, bonds and mutual fund units, the fair market value is based on the securities' closing price on a designated stock exchange. For other types of capital property, the fair market value must be assessed by a knowledgeable person at the time the gift is given (for gifts of real estate, two evaluations are required). As soon as title has been transferred to the charity, the charity can then issue a receipt based on the accepted fair market value of the gift.

When a gift of capital property is made to a charity, a disposition (or sale) is deemed to have taken place. Any capital gain arising from this disposition will have to be added to the donor's income in the year of disposition, and one half of the capital gain will be subject to tax.

There is, however, an exception to this rule. In May of 2006, the Canadian government eliminated the capital gains tax on publicly traded securities which are directly donated to charities. As a result, there is a significant tax advantage to directly donating publicly traded securities to a charity. If a donor sells the securities and donates the proceeds, one half of the capital gain arising from the sale will be subject to tax, whereas if the securities are directly donated to the charity, the entire amount of the capital gain will be tax-free.

 

Note: Information on this page is not intended as specific financial planning or legal advice. We encourage you to consult your lawyer or financial advisor should you consider making such an important gift.


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The Call of the Poor
P.O. Box 117
St. Norbert, Manitoba
R3V 1L5
(204) 275-1432