By donating stocks directly to the Humane Society, donors can realize tax benefits. Since the donor does not cash in the stocks, they do not realize the “capital gains” on the stock investment. A Capital gain is the difference between the purchase price of the stock and the sales price of the stock. Capital gains are considered as part of income in the year the stock is sold and so is subject to tax. By transferring the stock directly to a not-for-profit organization, capital gains is not part of the donor’s income and the whole amount makes it to the Humane Society.
Your gift of securities entitles you to a donation receipt for the full market value (resale) of your contribution. Your gift of securities will result in a generous, non-refundable tax credit that will have the effect of lowering your income taxes. You can use your tax credit in the year of your gift or carry it forward for up to five additional years.
You pay no capital gains tax on the appreciated value (increased price) of your securities. Capital gains tax on appreciated securities donated to a charity was completely eliminated by the federal government in 2006. Donating securities directly to the Sarnia Humane Society avoids the tax on capital gains, maximizes the return on your investment and protects the tax credits for use against other taxable income.
The securities must be transferred to the Sarnia Humane Society and not sold by the donor. The gift will not qualify for the capital gains tax elimination if the securities are sold and the cash then gifted to a charity.