If you own stocks, bonds or mutual funds, you are happy when their investments increase. Unfortunately, when you convert your investment to cash, the capital gain is taxable. By directly donating your publicly listed securities to Royal St. George’s College, you will not pay capital gains tax on their increase in value.
Benefits to Charity
• Listed securities can be sold and converted to cash.
• The charity, being tax-exempt, is not taxed on the capital gain.
Benefits to Donor
• Donation receipt for fair market value of the securities.
• The donor is taxed on none of the gain. If the securities were sold by the donor, 50 percent of the gain would be taxable.
EXAMPLE (COMPARISON OF GIFT AND SALE):
Daniel contributes to a public charity listed stock having a fair market value of $10,000 and a cost base of $2,000. His net income is $160,000 per year, and his other charitable gifts exceed $200.
Capital gain $8,000
Taxable gain - 0 -
Tax on gain - 0 -
Donation receipt 10,000
(44% combined rate) 4,400
If stock were sold rather than contributed:
Sales proceeds $10,000
Capital gain 8,000
Taxable gain (50% x $8,000) 4,000
Tax on gain (43.75% x $4,000) - 1,750
Net after-tax proceeds
($10,000 – 1,750) $8,250
Net cost of donating stock
compared to selling it
$8,250 – 4,400 = $3,850
If Daniel would otherwise sell the stock, it costs him $3,840 to make a $10,000 gift. In other words, the cost of the gift is only 38.5 percent of the stock’s value.Securities Form