The Gift-in-kind

 
Gifts-in-kind are donations to The Kidney Foundation of Canada other than cash gifts. For example: real estate, securities such as stocks, bonds, mutual funds, drafts, futures or any other publicly traded securities, or even works of art, jewellery, etc.

When you donate property, you are deemed to have disposed of the property at its fair market value at the time of the donation, and this contribution entitles you to a tax credit.

If the fair market value of some properties, such as traded securities, is easy to determine, such is not the case of other properties that require an evaluation. The ministries of revenue request that properties that have an estimated value higher than $ 1,000 be evaluated by independent experts.

The donor receives a receipt for income tax purposes. However, when the value of the property has increased compared to the acquisition cost, the increase constitutes a gain in capital taxable at the rate of 50 %, except in relation to a direct donation of securites.See donation of futures.

Make a Gift-in-kind and continue enjoying the gift during your lifetime
It is possible to make a gift to The Kidney Foundation of Canada while reserving the right to continue to use the property itself during your lifetime. Such is the case, for example, of a donation of real estate or a work of art.

You can irrevocably transfer the gift to the Foundation and receive an income tax credit for charitable donation according to the instructions of the Canada Customs and Revenue Agency (formerly Revenue Canada). The income tax credit will be less than in the case of a cash donation, but you will be able to continue to enjoy the use of the property for as long as you live.

According to this plan, the upkeep of the property remains the responsibility of the donor. Your financial or legal advisor can explain the potential advantages of this type of gift in kind.

Gift Securities: Attractive Tax Shields
Since the changes in the 1997 Federal Budget concerning the donation of investment securities to registered charities, it is now much more attractive for individuals to dispose of investment securities to the benefit of The Kidney Foundation of Canada.

Indeed, if you decide to make a donation of stocks, bonds, mutual funds, shares, futures or any other stock marketed security, you will have to declare only 25 % of your taxable capital gains which you would normally have realized when disposing of the securities, instead of half (50 %), as is usually the case.

With these new income tax measures, if you wish to make a donation to the Foundation, it is therefore much more profitable to directly donate your shares instead of selling them and offering the proceeds of the sale to the Foundation.

Let's take, for example, an individual taxed at 50 % of his income, who owns shares which cost him $ 10,000 and that are now worth $ 20,000. What is the most advantageous for him: to sell the shares and donate the proceeds of the sale, or simply to donate the shares to the Foundation?

The chart below indicates the various calculations to evaluate the tax benefits of each choice:

 
A gift of the proceeds of the sale of shares
vs a gift of qualified shares

By an individual whose income is taxed at 50 %
Sell shares & donate proceeds
Donate qualified shares
Value of donation (A)
(Current share market value)
20 000 $
20 000 $
Adjusted cost base (B)
(Initial cost of shares)
10 000 $
10 000 $
Capital gains (A - B = C)
(Realized Gains)
10 000 $
10 000 $
Taxable rate of capital gains (D)
(Part of the capital gains declared in the income)
50 %
25 %
Taxable capital gains
(C x D = E)
5 000 $
2 500 $
Income tax on E
(Taxable assumed rate of 50 %)

2 500 $
1 250 $
Total income tax credits (federal + provincial) for donation (50 % of donation A)
10 000 $
10 000 $
Net tax savings
7 500 $
8 750 $
Net cost of donation after income tax
12 500 $
11 250 $
 
By donating the securities, the donor reduces his costs after income taxes by $ 1,250. Consequently, a direct donation of qualified securities to The Kidney Foundation of Canada is preferable to selling them and offering the proceeds of the sale to the Foundation.
 


Why donate securities to The Kidney Foundation of Canada?

  • You will receive an income tax receipt, the equivalent of the fair market value of the shares;

  • You are entitled to a total income tax credit (federal and provincial) equivalent to approximately 50 % of the value of the gift;

  • Only 25 % of the capital gain is added to your income, instead of 50 %, if the value of your assets has increased with regard to the purchase price;

  • You contribute to the fight against kidney disease.