Donating Appreciated Securities
When it comes to contributing to a DAF there may be tax benefits in donating securities rather than cash. When donating financial assets that have appreciated in value, the capital gains tax on the appreciation is eliminated.
Below is a sample comparison between selling securities and donating the cash proceeds, and donating those same securities directly.
The Tax Benefit of Donating Securities:
|Selling Securities and
|Value of donation (A)||$100,000||$100,000|
|Cost base (B)||$40,000||$40,000|
|Capital Gain (A - B = C)||$60,000||$60,000|
|Capital gain inclusion rate (D)||50%||0%|
|Taxable capital gain (C * D = E)||$30,000||$0|
|Tax on taxable capital gain (E * 46%)||$13,800||$0|
|Donation tax credit (A * 46%)||$46,000||$46,000|
|Net tax savings (S)||$32,200||$46,000|
|Net after-tax cost of donation (A - S)||$67,800||$54,000|
|Tax benefit of donating securities||$13,800|
The example above uses a flat rate of 46% to represent the top combined federal and provincial tax rate and donation credit rate. Actual income tax rates and tax credit rates depend on the taxpayer’s province of residence.
Raymond James Ltd. is providing this calculation for illustration purposes and it does not take into account all possible tax situations. It contains information we believe to be reliable, but its accuracy cannot be guaranteed. This information is general in nature and is not to be construed as tax or legal advice. Clients should consult their own tax advisors concerning the tax consequences for their particular circumstances. The information is furnished on the basis and understanding that Raymond James Ltd. is under no liability whatsoever in respect thereof.