Tax Assistance for Charitable Donation
Example: Tax Assistance for Gift of Cash vs. Publicly Traded Securities
|
Cash |
Publicly Traded Securities |
|
| Fair Market Value of Donation |
$1,000,000 |
$1,000,000 |
| Top Marginal Tax rate |
46% |
46% |
| Value of Charitable Donations Credit (A) |
$460,000 |
$460,000 |
| Typical Cost Base Security |
|
$400,000 |
| Capital Gain Security |
|
$600,000 |
| Capital Gain Tax if Sold (Not Donated) |
|
$150,000 |
| Tax saved due to Incentive (B) |
|
$150,000 |
| Total Tax Assistance (A+B) |
$460,000 |
$610,000 |
| Cost of Donation to Donors |
$540,000 |
$390,000 |
Note: The new rules introduced in the 2006 & 2008 Federal Budget reduced the capital gain realized on the donation of certain securities (including shares in public corporations, units in a mutual fund trust and an interest in a segregated fund policy) to nil. This effectively increased the value of the charitable donation by eliminating the tax liability arising from the disposition of the security. The 2015 Federal budget proposes effective after 2016 individual and corporate donors of real estate or shares of a privately held company will be exempt from Capital Gains Tax on disposition if the proceeds are donated to charity within 30 days.
Double the Gift, Halve the Cost
Example: Gifts of Cash vs. Gifts of Charitable Insurance
| For Donor | Cash Gift1 | Insurance Gift2 |
| Cost | $1,000,000 | $400,0003 |
| When | Now | Over 10 Years |
| Receipt | $1,000,000 | $400,000 |
| When | Now | Now |
| Net Cost4 | $540,000 | $216,000 |
| Benefit to Charity | $1,000,000 | $2,000,0005 |
| Time of Benefit to Charity | Immediate | Deferred |
[1]gifts of after tax capital of $1,000,000
[2] gifts of insurance initial face amounts totaling $1,000,000. Either the premium payments or the death benefits are 100% receiptable
[3]total cost of insurance assumes non-smoking, healthy male aged 45 and utilizing the pricing of one of Canada’s major carriers
[4] assuming marginal tax bracket of 46%
[5] at actuarial life expectancy, assumed age 85, the projected death benefit is based upon a combination of guaranteed cash values and non-guaranteed dividend projections, therefore future values may fluctuate
