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Take Stock in UJA!

Stock donations are a great way to pay your UJA pledge.

 

Recommendations from tax expert Jamie Golombek:

 

If you’ve got any appreciated publicly traded stock or mutual funds in your non-registered portfolio, it’s a slam dunk to consider donating them “in-kind” to UJA Federation charities to satisfy your Campaign pledge, open a charitable fund, or make a gift to the Tomorrow Campaign. After all, not only will you get a tax receipt equal to the fair market value of the shares or funds being donated, but under a special government incentive rule to encourage charitable giving, you will also avoid paying any taxes whatsoever on the accrued capital gain up to the date of donation.

 

Still want to own that stock or fund in hopes that it will soar even higher? No problem - use the cash you were going to use for your charitable gift to purchase the stock or mutual fund you just donated to UJA. By doing so, your tax cost or Adjusted Cost Base (ACB) will be the current fair market value paid, reducing your potential capital gains tax exposure when you ultimately do sell the security.

 

The  Benefits Are Clear:  If you SELL a security, you pay tax on 50% of the capital gain. However, when you DONATE a gift of securities to UJA Federation charities, the taxable capital gain is completely eliminated.   And you receive a tax receipt for the full market value of the security in the amount of the closing trading price on the day UJA/Jewish Foundation receives the security.  This multiplies the impact of the tax benefit of your charitable giving.

  Sell Security and Give Cash Donate Security "in-kind"
Market Value of Security $10,000 $10,000
Cost Base $5,000 $5,000
Capital Gain $5,000 $5,000
Taxable Capital Gain $2,500 $-
Tax Due on Taxable Gain at 53.5%1 $1,337.50 $-
Tax Receipt for Gift $10,000 $10,000
Value of Tax Credit at 50.41%2 $5,041 $5,041
Net Tax Savings3 $3,703 $5,041

 

1 Top marginal federal and Ontario tax rate applicable to taxable income in excess of $220,000 for 2017

2 Top marginal federal and Ontario donation tax credit rate applicable to aggregate charitable donations in excess of $200 for the 2017 calendar year. This rate only applies if the Ontario donor's taxable income is in excess of $220,000 for 2017

3 The tax savings arising from charitable donations will vary from donor to donor and depends on the donation amount, the donor's province or territory of residence, and the donor's taxable income.

 

Frequently Asked Questions

  • How do I actually save more and give more by donating gifts of securities?

    • Let’s say you purchased common shares in ‘X’ Company for a cost of $20,000. If the current market value of the shares has increased to $100,000, you would have a capital gain of $80,000. If you sell these shares, and donate the cash, you would need to pay tax on the capital gain. Instead, by donating the shares, you get a tax receipt for the $100,000 and pay zero capital gains tax. As a result, you now have a tax credit of $46,000, which is $18,400 more than if you had sold the shares and donated the proceeds. Thus, this method of giving is more tax-efficient.

  • What will the value of my receipt be?

    • Your receipt will be valued based on the closing price on the day when the shares are legally transferred to a UJA/Jewish Foundation brokerage account.

  • How long does it take for my donation to reach UJA/Jewish Foundation's Brokerage Account?

    • That depends. Generally, most securities take a few days to get to us once you’ve submitted the Letter of Authorization to your financial advisor. Some securities however, can take a few weeks. (e.g., mutual funds)

  • What amount gets credited into your UJA/Jewish Foundation account?

    • The amount credited to your pledge will be based on the tax receipt value of your donation.

  • How much can I claim?

    • Claim charitable donations up to 75 per cent of your net income. A five year carry forward on any unused donation amount is permitted.

  • What counts as publicly listed securities?

    • Your donation must be of securities that are traded on a public market in Canada or the United States. This includes stocks and mutual funds.

  • What amount gets credited into my Endowment Fund?

    • The amount credited to your pledge will be based on the net proceeds realized from the sale of the securities, less selling commission.

  • How and when do I get my tax receipt?

    • You will receive your tax receipt by mail after your securities have been received and sold. Please note: according to Canada Revenue Agency (CRA) guidelines, the value of your donation for tax receipt purposes will be determined by the closing value of the shares donated on the day that your donation is received into our account.

Contact Information

The UJA/Jewish Foundation Donor Services Department can help guide you through the process and provide any necessary information.  Please contact our Business Operations Coordinator, Lisa Levstein at 416.631.5830 if you require any assistance.

 

Jamie Golombek is Managing Director, Tax & Estate Planning, with CIBC Financial Planning & Advice in Toronto. Mr. Golombek also writes the weekly column “Tax Expert” in the National Post and is a regular personal finance guest on BNN and the CBC.
 

This communication is intended to provide general information only. It should not be construed as, or relied upon for, specific investment, tax or legal advice nor does it constitute an offer, solicitation or recommendation to buy, sell or hold any securities. Anyone wishing to act on the information herein should consult with his or her professional advisor.

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