Registered charities may receive fewer donations when proposed changes introduced in the March 22, 2011 federal budget come into effect. These proposals, which are now in draft legislation, aim to reduce the tax benefits of donating publicly traded flow-through shares to registered charities. “The budget proposes that only the capital gain in excess of the original cost of the flow-through share will be exempt from tax,” explains Senior Tax Partner Jeff Nightingale. “This is a significant change since an added benefit of donating flow-through shares will no longer be available to taxpayers. When this draft legislation becomes law, the change will take effect for any shares purchased after March 11, 2011.
“Under the existing rules, the tax cost of the shares is reduced to nil by virtue of the flow-through of deductions and credits. If the shares are donated, the resulting capital gain, which is equal to the value of the shares, is not taxed. The proposed change will tax the portion of the share cost that was written off when purchased, thereby significantly increasing the after-tax cost of the donation.” If you need further information, please contact your Lipton adviser.
