In my previous video I talked about how the
tax credit works when you make a cash donation.
That was the easy one.
As we work through this series, I’ll be
discussing other donation options and the
associated tax credits.
I’m Peter Guay of PWL Capital, and in today’s
“Do It Together” segment, we’ll take
a look at the tax advantages of donating shares
from your portfolio or land for conservation
purposes.
Most of my clients benefit from giving shares
from their portfolios, instead of cash.
In some cases, I’ve facilitated land donations
as well, for conservation purposes.
Land donations are a bit more complicated,
so let’s start with securities.
Securities include shares listed on a stock
exchange and bonds, as well as mutual fund
units.
Under normal circumstances, any gain from
the disposition of securities, is considered
capital gains and attracts capital gains tax
That’s pretty standard.
But you can avoid paying capital gains tax
by donating the securities directly to a registered
charity.
For such donations, the taxable portion of
the gain is reduced to zero so that the disposition
of the security to the charity is fully exempt
from capital gains tax.
When you donate the securities, they are assumed
to be donated at Fair Market Value or FMV.
This benefits everyone because the charity
gets the full value of the security, you get
the charitable receipt for the full amount,
and you don’t have to pay capital gains
tax.
In terms of the tax credit, it’s still the
same breakdown federally and provincially
for donations under or over $200, depending
on your net income.
I covered that in my previous video which
I will link below if you need a refresher.
So that’s securities but what if you want
to donate land?
You can donate land in Québec with recognized
ecological value, or servitudes encumbering
the land for preservation, to qualified donees.
The CRA and Revenu Quebec love these sorts
of donations because it helps preserve biodiversity
and leaves a legacy for future generations.
But that doesn’t necessarily mean that they’ll
make it easy!
To donate the land and qualify for the tax
credit, you’ll need a few things, one being
a Certificate of Ecologically Sensitive Land
and a few other documents that describe the
fair market value of the land to be donated,
the charity’s acceptance of the donated
land as ecologically sensitive, and obviously,
you want the official donation receipt (from the charity).
Ecologically sensitive status for your land
gets you an exemption from the capital gains
tax.
You can still donate land without that status,
you'll just have to pay the tax on the gain.
In terms of the tax credit when you donate
land, the same formula still applies.
There are good tax benefits when you donate
securities and land, just be sure to do it
right!
In my next video, I’ll talk about the tax
implications of donating through foundations.
If you are interested in more information
like this, sign up and subscribe to my YouTube
channel and don’t forget to click the bell
so you get notified when I upload new videos.
I'm Peter Guay and this has been "Do It Together"
Financial Planning.
