Gifts of Listed Securities

Planning Opportunities With Listed Securities

1. When it’s time to sell

You may own securities you don’t think will perform in the future as well as they have in the past, or maybe you expect a correction in the entire market. Nevertheless, you hesitate to sell because you don’t want to pay tax on the gain. If you have been planning to make a charitable gift, these securities could be the ideal asset to use for that gift.  The net cost of the gift could be relatively low.  Consider this example.

Example:  Charles thinks it is time to sell some stock now valued at $10,000 with an adjusted cost base of only $2,000. He has also been thinking of making a $10,000 gift to his parish for outreach ministry. His combined federal and provincial tax rate and charitable tax credit are both 45%. What is the real cost of giving the stock instead of selling it?

It costs Charles only $3,700 to give stock worth $10,000. Had he given $10,000 cash and sold the stock, the gift would have cost him $5,500. That is because he would have paid $1,800 more tax on the capital gain.

2. When you want to hold

Unlike Charles in the previous example, you may have a stock you think has a great future. While you like the idea of exempting part of the gain from taxation, you don’t want to lose out on likely future appreciation. Thus, you are more inclined to hold the stock and make this year’s charitable gift with cash.

If you hold such stock, you might consider giving it and using the cash, which you otherwise would have given, to repurchase the stock on the market. Thereby, you would get a stepped-up cost base in the stock, and when you sell it in the future you will be taxed only on the gain accruing after the repurchase.

3. Bequest of Securities

The full exemption from taxable gain applies to charitable bequests as well as to lifetime gifts. Thus, if you intend to make bequests to the church as well as to family members, it could be advantageous to fund your charitable bequest with appreciated, listed securities and your family bequests with other assets. You can do this either by making a specific bequest of certain securities, or by empowering your executor to select the assets for the charitable bequest.

Suppose, for example, that your estate consists of your principal residence, plus cash, plus $100,000 of listed stock with an adjusted cost base of $40,000, and that you want to leave $100,000 to the Anglican Foundation and the balance to your children. If the stock goes to the children, $30,000 of the gain (50% x $60,000) will be taxed, but if it goes to the Anglican Church, the full $60,000 gain will be exempt from taxation. Better, then, to give the church your stock and the children your cash and principal residence, neither of which is taxable.

Contribution Limits

For gifts to registered charities such as the Anglican Church of Canada, (or any parish, diocese, General Synod or our national partners), the maximum amount of charitable contributions made prior to the year of death that can be claimed for credit in any one year is 75 percent of net income plus 25 percent of the taxable gain arising from the gift. Unused contributions can be carried forward and used for up to five years beyond the year of the gift. The contribution limit for gifts made in the year of death (including bequests) is 100 percent of net income reported on the terminal income tax return, with a one-year carryback.

Charitable Registration Number: 10808 2835 RR0001

The information in this document does not constitute legal or financial advice and should not be relied upon as a substitute for professional advice. The Anglican Church of Canada encourages you to seek qualified legal, estate planning, and financial advice before deciding on a course of action.