Donate Securities to Charity [Doing Well by Doing Good]

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Bylo Selhi
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Post by Bylo Selhi »

Bylo Selhi wrote:
Norbert Schlenker wrote:The tweaked one, hopefully a little easier to read, is here.
Norbert's piece stars in today's Star: Giveaway of stock can keep taxes at bay. :thumbsup:
And another mention by Daw today. Norbert must be turning red :shock: :lol:
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Norbert Schlenker
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Post by Norbert Schlenker »

While attempting to improve my preferred share interface, I broke things badly :oops: so I tried something simpler. ;)

Upthread I laid out a formula that gives the fraction of an appreciated share position that can be donated and the remainder sold with no significant change in one's tax bill. Needless to say, formulae aren't a favourite with many, especially not in the general population. So I built an online calculator to do the nasty.

Before I make it public (and send the link to Mr. Daw :lol:), I would appreciate feedback.


P.S. Prefs still coming but visitors coming too. Some delays are expected.
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Bylo Selhi
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Post by Bylo Selhi »

I'm struggling with T1170, Capital Gains on Gifts of Certain Capital Property.

In past years all capital gains that arose from charitable donations of shares of stocks and mutual funds qualified for a 0% CG inclusion rate.

This year, based on proposed changes to tax rules, the same 0% inclusion rate should apply if there has been no "advantage" in respect of the donation. In my situation there has been no "advantage" yet UFile allows me to claim only a small part of my CG at 0% and the bulk at 50% inclusion. This makes no sense to me.

In addition, the T1170 references pamplet P113 Gifts and Income Tax. From what I can see the CGs from my donation of shares should be at 0% inclusion.

Has anyone else run into this using UFile or any other tax software? If so, how did you resolve this?
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Bylo Selhi
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Post by Bylo Selhi »

Bump for 2009.
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Re: Doing Well by Doing Good

Post by Bylo Selhi »

My MP, Peter Braid makes motion on donations
...introduced a private member’s motion in the House of Commons on Friday.

The motion asks for a review of the charitable tax credit, and the proposal to remove capital gains tax from donations of private company shares and real estate. If the motion passes, the resulting study could recommend changes that could benefit both charitable organizations and the donors who support them.
I don't understand how this could possibly work. Real estate, fine, you could get one or more appraisals, etc. But how would this work with shares of a private company? How does one establish fair market value without selling the shares (and to an arm's length buyer at that)? Worse, if you do sell the shares, you've crystallized capital gains, thus defeating the purpose of the motion. Even worser, if you literally donate the shares to a charity, how are they supposed to realize FMV, especially if this is a closely-held private company, e.g. a family business or holding company? (They're going to sell them back to the donor, effectively bumping up the ACB? :shock: ) I like the notion behind the motion but I don't see how it could work in practice.

Any ideas?

BTW, what's a "private member’s motion"? [No funny comments about Peter's BSD and the like, please ;)] I presume it's an even weaker version of a highly unlikely to pass private member's bill? Assuming this motion does pass, what happens next, i.e. by what process could it ultimately become law?
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Re: Doing Well by Doing Good

Post by Bylo Selhi »

Bump, plus Some guiding principles for giving back - The Globe and Mail
Let me encourage you to donate for reasons other than tax savings...

There are a couple of guiding principles around giving that I’d like to share. First, give until you feel it. My experience has been that those individuals who truly experience the rewards of giving are those who have donated such an amount that they feel as though they’ve sacrificed something...

The second principle is this: Give cheerfully. While giving until you feel it is excellent practice, don’t give grudgingly or until you’re panic-stricken. Be cheerful about the gift...
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Re: Doing Well by Doing Good

Post by Bylo Selhi »

Donate securities to charity (and be a bit of a tax Scrooge)
Gifting investments to a charity can trigger a capital gain or capital loss, depending on whether the investments have appreciated or declined in value. In the case of capital gains, one half of gains are normally taxable when those gains are realized, but thanks to changes introduced in 2006, any capital gain triggered by making a donation of publicly traded securities to a registered charity is eliminated under tax law.

The result? Today, it makes more sense to donate securities that have appreciated in value than donating cash of an equivalent amount.
Something Tim keeps forgetting to mention is that most discount brokers will transfer shares from your account to the charity's account without charging the usual ~$50 transfer fee.

If you plan to donate shares contact the charity and ask them how to do it. They'll give you the information about their broker that you'll need to give to your broker.

If your broker is TD Waterhouse you'll use Charitable Donation of Securities in Kind Form # 524386. You can fax it to TDW on 1-877-639-4547 if you want to ensure this happens in time. Turnaround is usually 2 or 3 days.
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Re: Doing Well by Doing Good

Post by SoninlawofGus »

Am thinking of selling some shares to give to charity this year, but information seems scarce. This board is oldish, so I'm hoping someone will have a current perspective:

- Any issues with filing electronically? I found a now old article by Tim Cestnick saying that CRA would not allow electronic filing if shares are donated. But it's not in the list of things the CRA declares ineligible for e-filing, so I'm thinking it's okay now. Upthread, Bylo mentions doing this with Ufile, though he had some issues (I use TurboTax). Is e-filing all good now?
- Do the bank and brokers continue to waive transfer fees to charities? I'm with TD and TDDI. Does this need be arranged in advance with the broker?
- If anyone has done a partial transfer of shares/units, any issues with that?

If there is a newer discussion or thread, my apologies for not finding it:
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Re: Doing Well by Doing Good

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SoninlawofGus wrote:Am thinking of selling some shares to give to charity this year
Do not sell. You have to transfer the shares. If you sell you'll be subject to capital gains tax.
- Any issues with filing electronically?
I've filed electronically for years without any issues. Sometimes CRA sends me a letter in June or July asking for copies of the tax receipts I received from the charities. I fax them to the number in their letter and some months later get another letter that says the inquiry is complete. My donations are substantial and probably break CRA's threshold for "typical" tax credits. They're also looking for donation scams. All the charities I support are legitimate. This is no different than if CRA questions any other deduction or credit, e.g. if you've claimed high medical or moving expenses.
Bylo mentions doing this with Ufile, though he had some issues (I use TurboTax). Is e-filing all good now?
UFile hasn't caused problems with this in several years. Go ahead and e-file. Make sure you keep all relevant receipts. This is no different from any other receipts, T-slips and other relevant tax documents.
- Do the bank and brokers continue to waive transfer fees to charities? I'm with TD and TDDI.
Yes. I've never been charged a transfer fee by TDDI. If it's a listed stock they sometimes do the transfer the same day as I faxed in the form. Mutual funds take longer so don't leave this until late December.
Does this need be arranged in advance with the broker?
If you've never done this before you may want to call in to TDDI to confirm the correct fax number (which is not on their form) or mailing address if you prefer snail mail.

You will need to get the receiving broker's ID info from the charity, but you won't have to deal with that broker directly. It's also important that the charity knows in advance that you're about to transfer shares to them. Otherwise they may reject the incoming shares because they don't know who you are.

This is the TDDI form you will need: Authorization to Transfer Non-Registered Accounts. Some charities insist you use their form. It will contain essentially the same info. TDDI will accept either form, or even a letter of instruction, providing it contains the information they request on their form.
- If anyone has done a partial transfer of shares/units, any issues with that?
No problems. Also no problems with transferring ii shares of ABC, jj shares of DEF and kk shares of GHI, etc. The transfer form must of course indicate the number of shares, the name of the security and the symbol.

Feel free to ask more questions about this.
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Re: Doing Well by Doing Good

Post by SoninlawofGus »

All great info. Thanks Bylo! I too have received the request for charity receipts. In my case, they only asked for this the year I substantially increased our giving. After that, no requests. I changed the charities, but the amount given remained similar year over year.
Bylo Selhi wrote:
- If anyone has done a partial transfer of shares/units, any issues with that?
No problems. Also no problems with transferring ii shares of ABC, jj shares of DEF and kk shares of GHI, etc. The transfer form must of course indicate the number of shares, the name of the security and the symbol.
So no fees for any of this?
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Re: Doing Well by Doing Good

Post by Bylo Selhi »

SoninlawofGus wrote:So no fees for any of this?
I've done these transfers from TDDI, RBCDI and PH&N over a period of at least 10 years. I've never been charged a fee for this. I imagine the receiving brokers (working for the charities) may charge their clients to sell the incoming shares.
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Post by always_learning »

Norbert Schlenker wrote: Upthread I laid out a formula that gives the fraction of an appreciated share position that can be donated and the remainder sold with no significant change in one's tax bill. Needless to say, formulae aren't a favourite with many, especially not in the general population. So I built an online calculator to do the nasty.
Thanks for building this calculator, Norbert. Michael Dell is going to buy my shares of EMC, which are almost entirely capital gain.
a_l
p.s. While I can do algebra, using your calculator was much, much quicker.
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Re: Doing Well by Doing Good

Post by triker »

One brokerage that doesn't do this is Interactive Brokers. My largest capital gains are in an ETF held at IB, so I wanted to donate some of it this year. I attempted to send shares to Canada Helps using the letter of direction which they provide, but discovered that IB doesn't do "push" transfers. They apparently will do a "pull" transfer from one of your other brokerage accounts at a different firm, which sounds backwards to me. I haven't bothered to attempt this double transfer yet, and probably won't. The last couple months of market activity have helped take care of some of those extra capital gains.
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Re: Doing Well by Doing Good

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Bylo Selhi wrote:
SoninlawofGus wrote:So no fees for any of this?
I've done these transfers from TDDI, RBCDI and PH&N over a period of at least 10 years. I've never been charged a fee for this. I imagine the receiving brokers (working for the charities) may charge their clients to sell the incoming shares.
When I donated shares to the Toronto Community Fund my broker did not charge me anything. I was given a tax receipt for the entire amount donated but the charity's broker took a hefty fee off the donation before passing funds on to the charity. I raised this issue in a TCF focus group and suggested the org negotiate a smaller broker's fee, more in line with the costs of a typical discount brokerage. The suggestion was well received but I don't know if it was implemented since subsequent donations have been in cash.
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Re: Doing Well by Doing Good

Post by SoninlawofGus »

Sounds kinda awful on the part of the receiving brokerage. I've only dealt with discount brokerages, but why would a broker charge a fee for incoming funds? How hefty was the fee?
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Re: Doing Well by Doing Good

Post by pmj »

The broker sold the stocks. That's a transaction that legitimately generates a fee.
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Re: Doing Well by Doing Good

Post by SoninlawofGus »

Of course, sorry. I'm too tired to think on Fridays.
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Re: Doing Well by Doing Good

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pmj wrote:The broker sold the stocks. That's a transaction that legitimately generates a fee.
Agreed. I would have thought the broker would charge a reduced fee to a charity that gave the brokerage a great deal of business. I was annoyed that my donation was reduced by the greed of the charity's broker. I expected all of it to be deposited, since there are annual custodial fees charged to the account.
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Re: Doing Well by Doing Good

Post by gsp_ »

2015 was my first year giving stock, instead of cash, to charity. I chose to give some ancient mutual fund shares for several reasons; I'd been meaning to get rid of them but never had due to inertia and not having the slightest idea what the ACBs were. These were originally bought over two decades ago and DRIPed, some were auto switched to other funds during closings or fund consolidations. There's no way I can trace these ACBs and I figured I wouldn't need to since I was giving away my entire holding in the funds I donated and the CGs are zero rated. Now that I'm doing my taxes I'm realizing it's not that easy.

Should I just make up ACBs? Should I just use the ACBs listed by the MF providers on my statements even if some seem ridiculously low(I likely missed a capital loss claim way back during an auto fund switch)? I know the initial amounts invested but that seems rather useless.

Does any of this end up on schedule 3 or is it all taken care of on the T1170 form? Right now they aren't entered anywhere in Turbotax and the donation amount has been claimed. Even though my tax owing/refund is the same I'd rather avoid problems and questions later by doing it correctly the first time and learning for the next few years.

Thanks to Norbert and bylo for their posts in this thread and to anyone else who can help.
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Re: Doing Well by Doing Good

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gsp_ wrote:Should I just make up ACBs? Should I just use the ACBs listed by the MF providers on my statements even if some seem ridiculously low(I likely missed a capital loss claim way back during an auto fund switch)? I know the initial amounts invested but that seems rather useless.
I've been in the same situation as you where an accurate ACB wasn't readily available. I used a "reasonable guesstimate" (translation: a made up number.) In my case it was shares in a US company that had been DRIPed for years. Even if I could find the data, crunching it with a different FX every time seemed a waste of time, especially since as you've noticed, it doesn't make any different in the end.
Does any of this end up on schedule 3 or is it all taken care of on the T1170 form?
Yes, the T1170 takes care of it.

A couple of hints:
1. If the size of the donation is substantial and you NetFile, expect a letter from CRA this summer asking for copies of receipts from the charities. Most still issue paper receipts, so at tax time I scan them into a PDF. When the letter arrives I print off the PDF and fax that to them. I understand it may now be possible to upload via MyAccount and save some paper. I've never heard from them again, apart from last year when they managed to "lose" my fax—twice!
2. I've never been challenged by this but an accountant once told me it's best that the receipt or cover letter show that the donation was in-kind in shares and that it shows the security, number of shares and NAV used. IMO since these are listed securities, using the date of transfer from my brokerage statement, all the information CRA needs is available in the public domain.

Edit: typo
Last edited by Bylo Selhi on 09 Apr 2016 10:10, edited 1 time in total.
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Re: Doing Well by Doing Good

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Bylo Selhi wrote:I understand it may now be possible to upload via MyAccount and save some paper
CRA offered this last year for medical receipts. More than 100 sheets I didn't have to mail, and I included my spreadsheet to help them out.
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Re: Doing Well by Doing Good

Post by gsp_ »

Bylo Selhi wrote:I've been in the same situation as you where an accurate ACB wasn't readily available. I used a "reasonable guesstimate" (translation: a made up number.)
Thanks, I'll dig out the statements I never pay attention to and use their ACBs for simplicity.
Does any of this end up on schedule 3 or is it all taken care of on the T1170 form?
Yes, the T1170 takes care of it.

A couple of hints:
1. ...
2. ...
Thanks, I'll try to figure it out in Turbotax.

The donations were made through CanadaHelps. They emailed me the receipts so they're already in electronic format if CRA comes asking. They also have all the security details on them so no issue there.

Thanks again for your quick, detailed response. :thumbsup:
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Re: Doing Well by Doing Good

Post by Bylo Selhi »

It's that time of year again. Tim Cestnick published an article last year that explains the extra benefits of making charitable donations from a corporation rather than personally. This might be of particular interest to people who have investments inside a holding company.

Donating securities from a corporation can save you big tax dollars
In addition to the taxes saved from the deduction, the corporation saves $13,800 in this example ($60,000 capital gain times 50-per-cent inclusion rate times 46-per-cent corporate tax rate) because the capital gain is tax-free. But there’s more.

Every corporation has something called the “capital dividend account (CDA).” If your company has a positive balance in its CDA, you can pay tax-free capital dividends to yourself as a shareholder, up to that amount. The CDA is increased by the tax-free portion of any capital gain realized by the corporation. So, when Martha’s company donates the ABC shares, the full $60,000 capital gain on the disposition goes into the CDA since it was tax-free. This allows Martha to pay herself $60,000 of tax-free capital dividends afterward.

The tax that would have otherwise been owing on that dividend would be about $18,600 at a marginal tax rate of 31 per cent (varies by province) on eligible dividends.

The bottom line? The total tax benefits from donating securities in this example are about $78,400 ($46,000 from the deduction, plus $13,800 from the tax-free capital gain, plus $18,600 from the tax-free capital dividend). On a $100,000 donation, the after-tax cost to Martha is just $21,600 ($100,000 less $78,400). So, if you’re planning to give to charity this year, consider a donation of securities from your corporation to create hefty tax savings.
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Re: Doing Well by Doing Good

Post by adrian2 »

Welcome back, Bylo, you've been missed! :beer:
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Re: Doing Well by Doing Good

Post by brucecohen »

adrian2 wrote:Welcome back, Bylo, you've been missed! :beer:
+1 :thumbsup:
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