Capital gains tax eliminated on gifts of appreciated securities.
In May 2006, the federal government eliminated the capital gains tax on charitable gifts of publicly-listed securities donated to public charities. These changes may provide you with an unexpected means to make a major gift to Tafelmusik at a relatively low cost to you.
Stocks, bonds, and other investments can be good long-term investments, but they become a form of taxable income when converted to cash. By donating your securities to a registered charity, you not only receive a charitable receipt for the fair-market value of the gift, but you also eliminate the capital gains tax you would otherwise have to pay.
This new provision offers opportunities to realize very significant benefits:
Here is an example of the tax credit on a gift of appreciated securities to Tafelmusik:
If an individual donor purchased securities for $4,000 and they are now valued at $10,000, then the capital gain is $6,000. Tafelmusik benefits by receiving a $10,000 donation, and the donor pays no tax on the capital gain – saving them $1,380* (in comparison to selling the securities). The donor also receives a tax receipt for the full $10,000, which, in turn, creates a tax credit of $4,600*. This means that the donor receives a $4,600 tax credit on securities which originally were purchased for $4,000.
This chart illustrates the tax benefit to the donor:
| Sale of Stock, Donation of Cash Proceeds |
Donation of Stock Directly to Tafelmusik | |
|---|---|---|
| A. Fair Market Value of Stock | $10,000 | $10,000 |
| B. Original Cost of Stocks | 4,000 | 4,000 |
| C. Capital Gain (A minus B) | 6,000 | 6,000 |
| D. Taxable Amount | 3,000 (50% of capital gain) | 0 (0% of capital gain) |
| E. Tax Due on Capital Gain* | 1,380 | 0 |
| F. Charitable Tax Receipt/Gift to Tafelmusik | 10,000 | 10,000 |
| G. Charitable Tax Credit* | 4,600 | 4,600 |
| H. Tax Savings from Disposal of Stock (G minus E) | $3,220 | $4,600 |
*These calculations are based on an income tax bracket of 46% and a 46% tax credit. Please consult with your financial and/or tax advisor about information tailored to your own circumstances and to confirm applicable tax benefits.
As you can see, the donation of securities directly to Tafelmusik entitles the donor to a tax savings of $4,600 (Box H). That’s $1,380 more than the donor who sells their shares before making a donation of the same amount!
For your convenience, a form is attached which outlines the five easy steps to making a gift of securities to Tafelmusik, including the contact information to make such a donation. If you have any questions about this wonderful new opportunity, please contact Angela Nelson-Heesch, Director of Development (Interim), at (416) 964-9562 ext. 223, or angelanh@tafelmusik.org.
For your convenience, a form is attached which outlines the five easy steps:
Adobe Acrobat Reader to open this form. Download it free.) Thank you for your generous gift to Tafelmusik.
