Gifts of securities, such as publicly listed stocks, bonds and mutual funds, receive special tax treatment. Normally when you dispose of this type of capital property that has appreciated in value, 50 per cent of any capital gain (the difference between the original cost of the property and the current value) must be taken into your taxable income. This can greatly increase your income tax payable in a given year.
However, when you donate publicly listed securities by directly transferring them to the DMRF, none of that gain is included in your taxable income. You will receive a tax receipt for the current market value of the securities, producing a tax credit worth nearly 50 per cent of your gift!
The same 'zero per cent' inclusion rate on capital gains also applies to gifts of securities in your will.
If you are reluctant to use securities to make your gift because you think they will continue to grow in value, you could consider donating them and then use available cash to repurchase the securities on the market. This will raise the cost base of the securities, so when you eventually sell them in the future you will be taxed only on gains accrued since the repurchase.
Please note: To take advantage of the 'zero per cent' capital gains inclusion rate, the securities must be transferred directly. This does not apply if you sell the securities and donate the proceeds.
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