50/50 Donation of Securities Strategy

Elimination of capital gains on gifts of securities

If you own publicly traded securities (including stocks, employee stock options, bonds, mutual fund units, debt obligations etc.) or exchangeable shares (including partnership interests) that have increased in value and wish to facilitate a variety of financial and personal goals, while achieving a charitable objective, you may wish to consider the following “50/50” donation plan:

• 50% of the securities are donated directly to charity; and
• 50% of the securities are sold for personal use.

Using a “50/50” donation plan, a taxpayer will receive the following tax savings and benefits:

1. a tax credit approximately equal to the highest marginal tax rate in your province;
2. a capital gains tax exemption on the disposition of the stock (up to 22% additional savings, but typically in the 8% to 15% range); and
3. the ability to match tax credits with liabilities to balance goals.

Consider the results from a “50/50” donation plan, which maximizes tax savings and leaves more for personal use. For example, take a taxpayer with $100,000 in stock that was initially purchased for $25,000. The top marginal rate is 45%.

“50/50” Donation Plan

Alternate Illustration of “50/50” Donation Plan