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| Path: Main Street : Resources & Library : Research Articles : Feature Article |
Gifting securities in a down market: A new spin on an old idea
By Leslie Howard, founder of Planforgifts.com
January 5, 2009
With the past emphasis on gifting appreciated securities, charities and their donors have forgotten that there can be advantages for donors to make a gift of depreciated securities as well. The markets have been very unstable recently and most investors now find themselves holding portfolios that have declined in value. As donors stop making gifts of appreciated securities, charities are loosing out on this once important stream of gifts, but it doesn’t have to be that way.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 three years and forward indefinitely to offset capital gains.The marketing opportunity
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 repurchase some or all of the same securities in the market (after waiting a minimum period of at least 30 days). Depending on what happens to the markets in the 30-day wait period, donors could lower the Adjusted Cost Base (ACB) of their stock holding, allowing for greater growth potential when the markets recover.To sum up, donors can lock in their 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 turning a major market correction into a positive experience by supporting their favourite charity.
Thank you to Andrew Valentine and Sandra Enticknap of Miller Thomson LLP and Eleanor Chow of RBC Dominion Securities for their assistance with the content of this article. 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.
Leslie Howard is the founder of Planforgifts.com, one of Canada’s premier web-based planned giving resources for charities, nonprofits, professional advisors, volunteers and donors. For comprehensive material on developing a planned giving program with downloadable examples, visit www.planforgifts.com and become a member.
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