In December 2016 I wrote a post about How to Obtain Information on the Financial Transparency and Operating Efficiency of Canadian and US Charities. In this post I touch upon “donations in kind” and in particular the donation of shares in companies listed on a major stock exchange.
The definition of a “Share” can be found on the Canada Revenue Agency’s website.
How to Make Donations in Kind
You may be familiar with charitable donations made by cheque or automatic withdrawals from your bank account or credit card. Are you aware, however, that shares of publicly traded entities can be donated to charities?
While other sites may define donations in kind, I have yet to find a site that provides the fairly simple steps to follow to make such donations. Since I intend to make a donation in kind, I thought I would share the following.
- Contact the charitable agency to ensure they accept donations in kind;
- Contact your investment broker (discount broker) to ensure they can effect such a transfer of shares and to ascertain exactly what documentation they require from you;
- Prepare a Letter of Direction (LOD) that is acceptable to your investment broker (discount broker) and the charitable organization;
- Remit an original copy of the LOD to your investment broker (discount broker).
- Remit a copy of the LOD to the charitable organization. Typically they just require a copy but confirm this with them.
In our case I am stipulating that the transfer of shares is to occur after the ex-dividend date since I want to receive the next dividend payment. You may want to give this some consideration.
Upon receipt of the shares, the portfolio manager acting on behalf of the registered charity will sell the shares. Sale proceeds are then deployed according to your wishes.
You can also make a charitable donation in kind where you specify an amount the registered charity is to disburse over a period of years. In this case:
- the shares are sold;
- funds are placed “in trust”;
- you receive a tax receipt for the year in which you have made the donation;
- funds are disbursed according to your wishes.
Keep in mind that in Canada, the general annual limit on charitable donations as a percentage of net income is 75%. The limit on gifts by individuals, however, in the year of death (and the prior year) is 100%.
A high level overview of the tax implication of donations in kind can be found here.
We are fast approaching the end of the calendar year. If you are thinking of making a charitable donation and are interested in calculating your charitable donations tax credit you may wish to use Canada Revenue Agency’s calculator.
Thanks for reading!
Note: I sincerely appreciate the time you took to read this post. As always, please leave any feedback and questions you may have in the “Contact Me Here” section to the right.
Disclaimer: I have no knowledge of your individual circumstances and am not providing individualized advice or recommendations. I encourage you to make a charitable donation after have conducted your own research and due diligence. Please consult your financial advisor, where appropriate, about your specific situation.
I wrote this article myself and it expresses my own opinions. I receive no compensation and have no business relationship with any charitable organization referenced in this article.
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