Gift of Securities

Tax Smart Gifts.

Make the world a better place and save on your taxes!

Here’s how it works:
Let’s say you plan to give a gift to a charity…

You sell appreciated securities, give the cash to a charity, like cbm Canada, and receive a tax receipt for the amount. BUT you’ll pay capital gains on the appreciated amount.

Here’s a better way: If you donate appreciated securities directly to cbm Canada, you’ll not only be exempt from paying capital gains but you’ll get a tax receipt for the full value of the appreciated securities. A win for you – no tax! And a win for the children and families cbm serves – a more generous gift! It’s a win-win!

This chart assumes a 46% marginal tax rate. We’ve used it to illustrate, but note that it’s not intended to be legal or financial advice. We recommend that you get professional advice before deciding on your donation strategy.

By giving a special year-end gift, you can transform the life of a child like Mwajuma… And save on your taxes at the same time!

Mwajuma holding her baby sister
Mwajuma holding her baby sister.

Mwajuma, from Tanzania, loved going to school. She was a bright student and a happy worker at home. In the mornings before class, she’d go out with her father to herd goats in the field. That was until her sight began to fade. Soon she started to run into things, and it wasn’t long until Mwajuma became completely blind.

For three years, Mwajuma lived each day alone in the family hut, surrounded by darkness. Then one day, a cbm worker came through Mwajuma’s village and told her a cbm-supported eye hospital could restore her sight.

When her bandages were removed after surgery and Mwajuma looked out at a bright, clear world for the first time in three years, she clapped and sang with joy.

By giving a gift of securities, you will help a child like Mwajuma see again by giving her a miracle of sight. You’ll give new hope that’s so evident in Mwajuma’s bright smile.

cbm’s Gifts of Securities Acceptance Policy
The Most Tax-Effective Way to Fund a Gift in Canada

The 2006 Federal Budget reduced to zero percent the capital gains inclusion rate for gifts of publicly-listed securities to public charities. You can give appreciated securities to cbm and pay no taxes on the capital gains.

In other words, the 2006 Federal Budget has done away with ALL capital gains for donations of publicly-listed securities to charities like cbm. This means, when you donate appreciated securities to cbm, you pay no taxes on the capital gains that have built up in those securities.

You will also receive a charitable receipt for the full fair market value of the securities.

For more information, please feel free to call Linh Yuen, Finance Manager at 1-800-567-2264 ext 250, or complete the information form below.













YesNo

YesNo

Frequently Asked Questions

1. What is a gift of securities?

  • A gift of securities is a ‘Gift in Kind’ where you transfer the title of securities that are listed on an approved or designated stock exchange to the ownership of a public charity like cbm. This is almost always done electronically.
  • It’s very important that you don’t sell the securities first and then send the cash. You have to gift them or transfer the title to cbm as a ‘Gift In Kind.’

3. Who at cbm can answer my questions about gifts of securities?

Linh Yuen, Finance Manager
Telephone: 1-800-567-2264 ext 250
Fax: 1-888-845-7717
Email: finance@cbmcanada.org

Grace Soukup, Manager, Planned Giving
Telephone: 1-800-567-2264 ext 288
Fax: 1-888-845-7717
Email: plannedgiving@cbmcanada.org

4. What are the steps to making a gift of securities?

  • Contact Linh Yuen at cbm for the Gift of Securities Direct Transfer Form and complete it;
  • Give one copy to your broker and one to Linh at cbm;
  • Your broker may have you fill out other form(s) required by your financial institution;
  • Notify Linh when your broker is actually making the transfer;
  • Linh will have cbm’s broker watch for the gift so they can accept it into cbm’s brokerage account;
  • cbm’s broker will tell Linh when the gift comes and what the closing value is that day;
  • Linh will contact you and will let you know the gift has reached cbm’s account and the value that will be used for the charitable receipt.

5. How long does it take to make a gift of securities?

  • Gifts of stock/shares take a few days.
  • Gifts of mutual fund units can take up to several weeks.

6. What publicly-listed securities can I give to cbm?

  • a stock or share, debt obligation, or right listed on a designated stock exchange (Canadian or foreign);
  • a share of the capital stock of a mutual fund corporation;
  • a unit of a mutual fund trust;
  • an interest in a related segregated fund trust;
  • a prescribed debt obligation (e.g., government savings bond).

7. What is cbm’s brokerage account information and who can my broker contact there?

RBC Dominion Securities
Attn: John Morris, Vice President
14785 Yonge Street, 2nd Floor
Aurora, ON L4G 1N1
Telephone: (905) 841‐9371 or 1‐866‐377‐0339
Fax: (905) 841-7616
Email: john.w.a.morris@rbc.com

Attila Viszmeg, Associate
Telephone: (905) 841-1780
Email: attila.viszmeg@rbc.com

For processing gifts of securities, you will have to ask cbm for the brokerage account number, FINS number; DTC number; CUID; and Euro Clear number.

If you have US securities denominated in US dollars, you will need cbm’s US account number.

Please note that the brokerage account at RBC Dominion Securities is held under cbm’s legal name: Christian Blind Mission International.

8. Why is giving a gift of appreciated securities instead of cash the most tax-effective way to fund a gift? What tax benefits could I receive for giving a gift of securities?

  • Normally, if you sell securities that have capital gains in them (appreciated securities), you have to include 50% of the capital gains in your tax return and pay taxes on them.
  • If you gift appreciated securities to a public charity like cbm, you don’t have to include any of the capital gains in your tax return. In effect, the growth in the value is tax-free for you.
  • The 2006 Federal Budget reduced to zero percent the inclusion rate for gifts of such securities to public charities. This means there are no taxes payable on the (sometimes huge) capital gains.
  • You also receive an official charitable donation receipt for the full value – that is, the fair market value – of the securities. You can use the charitable receipt to off-set taxes payable on your other income. You can carry forward any unused charitable receipt amounts for five years.
  • You can share the charitable receipt with your spouse but not the tax exemption on the capital gains.
  • cbm recommends you consult with your financial advisor and/or accountant when making gifts of securities.

9. How will cbm determine the value of my official ‘Gift in Kind’ charitable receipt?

  • cbm’s official ‘Gift in Kind’ charitable receipt value will be determined by the closing value on the date the security is transferred into cbm’s brokerage account.
  • The closing day value per unit/share times the number of units/shares determines the fair market value or full value of the gift.
  • The official ‘Gift in Kind’ charitable receipt will list the name of the security, the number of units/shares, the date the gift was received and the value of the eligible amount of the gift which is the fair market value of the securities. (see sample below)
  • You will be notified by cbm staff that the gift has been received and what the total value of the official donation receipt will be.
  • The ‘Gift in Kind’ donation receipt will also indicate that you have not received any advantage.

Sample cbm ‘Gift in Kind’ official charitable donation receipt

Gift in Kind

 

 

 

 

 

10. What does cbm do with the securities I have given – do they hold them?

cbm’s policy is to immediately liquidate or sell the gifted securities after they come into cbm’s brokerage account. The money is used right away to help carry out cbm’s activities.

11. Can I designate my gift to a particular item or project or program of cbm?

  • Yes. At the time of your gift, cbm staff will discuss with you the particular items, projects or programs of cbm to which you can designate the proceeds.
  • You can also direct cbm to use your gift for wherever needed most at the time.

12. What do people say that have made a gift like this?

Gift of Securities Testimonial

We recently donated a gift of securities to cbm. By donating securities (rather than donating cash), we were able to make a donation of significantly greater value to cbm at the same after-tax cost to us, due to the fact that the Canada Revenue Agency provides preferred tax treatment on gifts of securities, such as shares of stock. In addition, because the stock shares that we donated had been obtained through the exercise of some employee stock options, additional tax benefits were realized on these transactions. Both of these factors allowed us to increase the value of our donation to cbm without incurring any additional out-of-pocket (after-tax) cost.

cbm was then able to use the funds obtained from our gift of securities to purchase an A-scan unit for the eye clinic at Good Shepherd Hospital in Swaziland, as well as a significant number of intraocular lenses. The A-unit enables the precise selection of the intraocular lens that is needed for each patient in the approximately 1,000 cataract surgeries that are performed annually by Dr. Jonathon Pons and his team at this cbm-supported clinic, thereby restoring sight in those who had not been able to see.

The staff at cbm and RBC Dominion Securities were very helpful in guiding us through the process of making the gift of securities and in ensuring the smooth execution of the related transactions. It may also be worthwhile to obtain the advice of a financial advisor before making a gift of securities, particularly for those who are planning to donate shares derived from stock options, as there are some important timing requirements that must be met in order to obtain all of the available tax benefits from CRA.

We were privileged to have had the opportunity to host Dr. Pons and his wife Helen for dinner at our home during their recent visit to Canada, and were inspired when we learned more about the incredible work that he and his staff are performing in the most challenging of circumstances. We are looking forward to visiting Dr. Pons at the Good Shepherd Eye Clinic next spring as part of an InSight tour group, and to learning more about cbm’s work in Swaziland.

It was very gratifying to learn directly from Dr. Pons about the impact of our donation. The purchase of the A-scan unit would not have been possible without the favorable tax treatment that was made available to us because we gave a “gift of securities”. We are thrilled that our gift of securities to cbm is enabling the gift of restored sight for so many people.

Anonymous Supporter
cbm Canada

13. What happens when I exercise my company stock options to fund my gift to cbm?

  • When an employee acquires a publicly-listed security under an option granted by the employer and donates the security to cbm within 30 days (and within the same taxation year), the employee may be eligible for a special deduction, the general effect of which is to exempt the associated employment benefit from tax.
  • The donation must take place in the same year in which the security is acquired.

14. What about donating flow-through shares to cbm?

cbm’s policy is to only consider a gift of flow-through shares once they have become publicly-listed mutual fund units.

Flow-through shares are issued by companies in the energy and mining sectors to raise funds for exploration. The flow-through shares can begin as units of a limited partnership which are eventually converted to listed units of a mutual fund or the investor may purchase shares directly.

The company allocates or ‘flows through’ the deduction of expenses that the company can’t use to the investor. The investor can then deduct an amount up to his original cost against his other income. His cost base of the unit/share could be reduced to $0.

The 2011 Federal Budget has reduced the benefits of donating these flow-through shares to a charity once the shares or mutual funds holding the shares are listed on a designated stock exchange. The capital gains are no longer fully exempt from taxes for flow-through share agreements entered into on or after March 22, 2011.

The Budget has reduced the benefits by limiting the exemption from capital gain tax to the extent by which the current fair market value of the shares or units exceeds their original cost base.

In other words, a donor can now only claim an exemption from capital gains for the amount that the flow-through shares’ donated fair market value exceeds the original investment cost to the donor.

Before the change in the 2011 Federal Budget, the government assumed nearly all the costs of the donation. With this change, a donor now shoulders a reasonable portion of the cost of donations.

Again, cbm’s policy is to only consider a gift of flow-through shares once they have become publicly-listed mutual fund units.

cbm’s policy is to consider these gifts on a case by case basis depending on how easily cbm can value the flow-through shares for receipt purposes and/or how easily cbm can sell the shares.

cbm reserves the right to issue a receipt with the date the shares/units are sold by cbm and for the dollar amount cbm actually receives on liquidation.

Before you donate flow-through shares to cbm, be sure to check with Linh Yuen, cbm’s Finance Manager at 1-800-567-2264 ext 250.

15. Once I’ve given a gift of securities, what forms will I need to use in order to fill out my taxes?

  • cbm recommends that you consult with your professional tax advisor when making gifts of securities.
  • You will need to download or obtain a copy of the T1170 Capital Gains on Gifts of Certain Capital Property form.
  • You will need to use this form along with Schedule 3 Capital Gains (or Losses) when you prepare your T1 General Income Tax and Benefit Return.
  • You will note that the T1170 form indicates the following: “If there is no advantage in respect of the gift, the full amount of the capital gain realized on the gift is eligible for an inclusion rate of zero.”

If there was no advantage attached to your gift(s), there will be no income tax charged on any capital gains in your gifted shares, mutual fund units or income trust units.

16. What if I want to donate a paper stock certificate to cbm?

  • You can gift a stock in the form of a paper certificate. But first, you will have to ascertain that the stock certificate is still listed on a public exchange; otherwise cbm will not be able to accept the gift as the gift cannot be liquidated and we cannot determine the value of the gift.
  • If you have the shares in the form of a paper share certificate, it is important to follow the instructions on the back of it very carefully in order to transfer ownership to cbm’s legal name “Christian Blind Mission International.”It is important that you send the certificate by registered mail to cbm; or you can hand-deliver the certificate to our office.
    Address: cbm (Christian Blind Mission International)
    3844 Stouffville Rd, PO Box 800
    Stouffville, ON L4A 7Z9
    1-800-567-2264 ext 250
    Attn: Linh Yuen, Finance Manager
    Email: finance@cbmcanada.org
  • If you mail the paper certificate to cbm, the official receipt value will be determined by the stock’s closing value of the post-marked mail date on the envelope.
  • If you hand-deliver the paper certificate to a cbm staff member or office, the official receipt value will be determined by the stock’s closing value of the date you hand-delivered the certificate to a cbm staff member or office.
  • Please note that upon receiving a paper stock certificate, cbm will first have to make sure that the stock certificate is still listed on a public exchange, otherwise cbm will not be able to determine the value of the gift or be able to liquidate the gift.

17. What’s the formula for donating enough of my securities to off-set my capital gains taxes?

What if you don’t want to donate all of your shares but want to sell some and keep the proceeds for yourself? How many shares should you donate to cbm to offset the tax bill on the shares you choose to sell for yourself? The following formula * works in most provinces at most income levels:

(FMV)*(FMV-ACB) / (3*FMV)-ACB where FMV is the fair market value of your investment and ACB is your cost amount

*Source: Tim Cestnick article in The Globe and Mail entitled “Summertime, and the giving is easy” June 17, 2010