Leave a Legacy to Reduce Taxes

Reduce Taxes – Consider a Direct Gift of Stocks or Securities

Ernie is a retired professional. He had planned his retirement so that a substantial amount of his wealth was invested in stocks. Over the years Ernie had done very well with his retirement investments. Now, Ernie and his wife enjoyed a comfortable retirement. If they needed additional income to pay for a trip or something extra Ernie would sell a few of his stocks, pay the capital gains tax and use the rest.

From time to time Ernie and his wife would make donations to charitable causes they believed in. To pay for the donations Ernie would sell enough stocks to pay for each donation plus sell extra shares to cover the capital gains taxes.

One day Ernie was talking with the Executive Director at the hospital foundation. Ernie and his wife wanted to make a substantial gift to a campaign the foundation was running. Ernie explained that he would be selling quite a few shares to cover his gift and that he would be selling additional shares to cover the capital gains taxes that would apply. That’s when the foundation’s Executive Director told Ernie there was a better way and it would reduce the taxes. Give the stocks directly to the charity. The charity issues a charitable tax credit receipt based on the value of the stocks the day they are gifted. Because the stocks are given to a registered charity the capital gains tax is reduced from 25% to 0%. As a result this method would reduce the total number of shares Ernie would have to sell in order to make their donation. Ernie and his wife get to keep more of their shares and still make their gift of stocks.

Here is how it works. For the past number of years the Federal Government has been reducing the capital gains tax rates on the sale of registered stocks and securities. What a lot of people don’t realize is when you gift the Publicly Traded Shares directly to a registered charity the capital gains rate is reduced from 25% to 0%. Plus you receive a Charitable Tax Credit Receipt for the full face value of the stocks you gift. Bottom line, giving the shares directly to the Registered Charity eliminates the capital gains tax and can reduce your taxes because you receive the Charitable Tax Credit Receipt from the Registered Charity.
 

Raiders AGM

Raiders impact on Prince Albert local economy continues to go up: AGM report

10h ago

Court proceedings

'The impact of this trauma will echo for generations': court case surrounding La Ronge woman's death reaches conclusion

Dec 11, 2024

Going Global

P.A.'s Zablocki named to Team Canada for U18 Women's World Championships

Dec 11, 2024