The Background

Most donors have traditionally considered giving gifts of securities at year end, when they assess their tax situation and look at revamping their portfolio. Let’s not forget that many investors have realized substantial capital gains in recent years and these capital gains can be offset by capital losses to minimize the tax the investor will have to pay. Remember, capital losses in Canada can be carried back 3 years and forward indefinitely to offset capital gains.

The Marketing Opportunity

Sending donors a consistant message is very important. There is not need for charities to change their overall marketing plan when is comes to gifts of securities, they just need to adjust the message to fit the current economic environment. When it comes to receiving and the valuation of gifts of secuities, the proceedures are exactly the same for gifts of appreciated and depreciated securties.

Donors can gift depreciated securities to their favourite charity, realize the capital loss and apply the loss against past and future capital gains. In addition, the charity will provide the donor with a charitable tax receipt for the value of the donated securities. The donor can use this receipt to offset taxes they would otherwise pay.

Donors can then turn around and go to the market to repurchase some or all of the same securities (after waiting a minimum period of at least 30 days). Depending on what happens in the markets in the 30 day wait period, donors could lower the Adjusted Cost Base of their stock holding, allowing for greater growth potential when the markets recover.

To sum up, donors can, lock in their capital tax loss to claim against past and future gains and receive a charitable tax receipt to offset tax while lowering the ACB of their security. Last but certainly not least, donors will feel good about using the market correction as an opportunity to support their favourite charity.

Thank you to Andrew Valentine and Sandra Enticknap of Miller Thomson LLP as well as Eleanor Chow of RBC Dominion Securities for their assistance with the content of this article. You can contact Eleanor for more infomation at eleanor.chow@rbc.com

This article is meant to provide marketing ideas only. It is not meant to be seen as tax or investment advice. Please consult your professional advisors for more information.