Gifts of Securities
You can benefit from substantial tax advantages when gifting securities to the MUHC Foundation, particularly appreciated securities. When you donate securities, a tax receipt is issued for the full market value of the gifted securities. Further, it is much more advantageous, both to you and to the MUHC Foundation, for you to gift the securities directly to the MUHC Foundation, rather than sell them and gift the proceeds. The 2006 federal budget has eliminated taxation on gains on marketable securities gifted to charities, meaning that one does not have to pay any tax on a capital gain if the securities are donated to the MUHC Foundation, whereas if one were to sell the securities, 50% of the appreciated value would be subject to capital gains tax, resulting in a larger tax burden for the donor and a smaller gift to the MUHC Foundation.
This table illustrates how significantly gifting appreciated securities to the MUHC Foundation, rather than donating the proceeds from the sale, affects your net tax savings. Assume you wish to donate $10,000 to the MUHC Foundation that you own in securities that you purchased for $2,000, and that you are in the highest tax bracket (48%). It would cost you $1,920 less to make $10,000 if you gift the securities directly to the MUHC Foundation rather than selling the appreciated securities and gifting the proceeds.
| Sell securities and donate the proceeds | Donate securities directly to the MUHC Foundation | |
|---|---|---|
| Value of securities | $10,000 | $10,000 |
| Capital gain | $8,000 | $8,000 |
| Taxable capital gain | $4,000 | 0 |
| Tax on capital gain | $1,920 | 0 |
| Tax credit | $4,900 | $4,900 |
| Net tax savings | $2,980 | $4,900 |
| Total cost of donation | $7,020 | $5,100 |
There are two methods for the transfer of securities to the MUHC Foundation.
If an investor’s securities are held by a broker, which is most often the case, there is no need to transfer the actual certificates. The donor can direct the broker to transfer the securities into a new account in the name of the MUHC Foundation. The date used for calculating the fair market value of the gift will be the end of trading on the date the gift is transferred from the donor to the Foundation. Income tax receipts will be issued for the deemed fair market value minus any administrative charges imposed as a result of the transfer of securities to the Foundation.
If an investor holds marketable securities in his or her own name, he or she may endorse the security certificates and transfer it to the MUHC Foundation. A receipt is then issued for the value of the security at the date of the gift.
