Donation of Stock

Introduction

As of the May 2006 federal budget, when you disposed of a stock holding by donating the stock to a registered charity, you did not incur any taxable capital gain and you still received a charitable receipt for the full value of the donation.  This was a double benefit – no taxable capital gain and a charitable receipt for a tax credit. 

As of January 2024, this is still true if your income for the year is less than $170,000.  However, if your income exceeds $170,000 for the year, then under the revised Alternative Minimum Tax (AMT), 30% of the capital gain is taxable.  Still a good tax strategy for those with high income but not as good as previously.  You should discuss with your tax advisor.

The First Unitarian Church of Hamilton uses a CRA-registered charity called Link Charity to handle stock donations made to the church.  You can find out more from their website at http://www.linkcharity.ca/ .

Concept

Donate the stock to Link Charity and receive your charitable receipt from Link Charity rather than the church.  Link Charity then writes a cheque for the cash value of the donation less a small transaction fee (currently $25 for a single donation) to the church.  Note: The church does not issue a charitable receipt as it has already been issued by Link Charity.

Process

Contact Link Charity to receive specific instructions on how to initiate the donation.  They have specific arrangements with different brokers.

Advise the Church Office that you have initiated a stock donation through Link Charity so that they are aware and can follow up with you or Link Charity if required.

Some Considerations

Include the Transaction Fee in Your Stock Transfer

Consider adding the cost of Link Charity’s transaction fee to the amount of the charitable donation that you are planning to ensure that the church receives the full amount intended.  For example, if you want to donate $2,000 to the church, transfer stock worth $2,025 to Link Charity.  They will deduct their fee of $25 and the church will receive the $2,000 that you intended.

Multiple donations at a time

You can make one donation of stock to Link Charity and have them divide the proceeds among multiple charities based on your instructions.  For example, you could donate $2,000 of stock to Link Charity and instruct them to send $1,000 to the church, $500 to United Way and $500 to Doctors Without Borders.  They will charge $25 for the first cheque and $10 for each of the other two cheques that they issue.   This is very efficient for you as well as the recipient charities.

Donate appreciated stock even if you have the cash

When you are about to make a charitable contribution, if you hold appreciated stock in an unregistered portfolio (i.e. outside an RRSP or RRIF), donate that stock (or some portion of it) even if you have the cash to make the charitable donation and even if you want to continue to hold that stock as part of your portfolio.  After donating the stock, replace the donated stock using the cash.

For example, if you wish to make a $2,000 charitable donation and you have $2,000 in cash and appreciated stock worth $2,000 in your unregistered portfolio, donate the stock and then replace it using the $2,000 in cash.  This eliminates the accumulated capital gain on the appreciated stock.