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PLANNED GIVING
PRESBYTERIAN
37
Sage Advice about Giving Securities
by Jim MacDonald and Karen Plater, Stewardship & Planned Giving
In 2006, the Federal Government eliminated capital gains taxes on charitable gifts of publicly traded securities given as a gift-in-kind to charities. This means that when se- curities are transferred to a charity, the donor receives a charitable gift tax receipt and they don’t pay the capital gains tax on its appreciated value. In 2005, $252,240 worth of stocks were donated to The Pres- byterian Church in Canada. This tri- pled the year after the tax break and in 2020—a challenging financial year—over $1.3 million was given.
Giving securities has become a popular way for people to sup- port capital campaigns and special projects and even give their regular offering to the church. The majority (70–80%) of shares received by the PCC are designated to congrega- tions, while the rest support Presby- terian ministries, including Presbyte- rians Sharing, PWS&D, Indigenous ministries and camps.
Lloyd and Lynda Skeoch, mem- bers of St. Andrew’s Presbyterian Church in Markham, Ont., kindly shared their experience to explain the popularity of giving shares.
Lloyd is an accountant and church treasurer, while Lynda is a customer service executive and an active par- ticipant in the congregation. Now retired, when they worked for large companies, Lloyd and Lynda each par ticipated in stock purchase and stock option plans. After many years of remarkable growth, the value of the stocks had stabilized and so they de- cided to make a gift of the stock, since there was no reason to wait for their shares to fur ther increase in value. They felt that they understood their financial situation enough to afford the loss of some dividend income and the downsizing of their stock portfolio. Lloyd explained, “We’d been saving these for a rainy day, but it’s not going
levels and provincial tax rates. The Presbyterian Church in Canada recommends that donors
Line
1 Value of the shares
2 Capital gain of shares
3 Capital gain tax
4 Value of Gift
5 Income tax credit
6 Cost to make the gift
#1 minus original investment
#2 Capital gain x 50% x 46%
#1 minus #3
#4 x 46%* #1 minus #5
$5,000 $5,000 $3,000 $3,000
$690 Not applicable
$4,310 $5,000
$1,983 $2,300
$3,017 $2,700
Description
Formula
Scenario A:
Sells shares, donates the proceeds
Scenario B: Donates shares as a gift-in-kind
(& tax receipt)
Note: This example assumes that the donor has to pay income taxes and can use the advantage of the income tax credit gen- erated by the gift. *Marginal tax rates vary according to income levels and provincial tax rates. The Presbyterian Church in
It Costs Less to Give More
By giving securities directly, Ms. Smith discovered it costs less to give more.
Ms. Smith’s marginal tax rate is 46%. She invested $2,000 in stocks and the shares are now worth $5,000 (line 1).
In scenario A, Ms. Smith sells the shares, reserves the amount to pay the capital gains tax (line 3) and do- nates the remaining cash (line 4) to her congregation. However, in sce- nario B, because she doesn’t have to pay any capital gains tax, she trans- fers the full $5,000 of shares to the church. This means she receives a larger tax receipt, so she also saves more on her income taxes (line 5).
When Ms. Smith sells the shares and gives the cash, the gift costs her $3,017 after taxes. But when she gives the shares as a gift-in- kind, it only costs her $2,700 after
Note: This example assumes that the donor has to pay income taxes and can use the advantage taxes. It costs less (line 6) to give
Canada recommends that donors seek professional advice to ensure that gifts are tailored to their circumstances.
more (line 4)!
of the income tax credit generated by the gift. *Marginal tax rates vary according to income
to rain that bad; so, it was time to let bill, so it’s also a way of using those
seek professional advice to ensure that gifts are tailored to their circumstances.
“We have different gifts, according to the grace given to each of us. If your gift is prophesying, then prophesy in accordance with your faith; if it is serving, then serve; if it is teaching, then teach; if it is to encourage, then give encouragement; if it is giving, then give generously; if it is to lead, do it diligently; if it is to show mercy, do it cheerfully.”
Romans 12:6–8 (NIV)
some of them loose. We can live with a smaller safety net.”
Lloyd crunched the numbers. With significant capital gains on his shares, he estimated that he’d have to donate an additional 24% to give the same amount in cash as he was able to give by transferring the securi- ties to the church. Lynda’s securities had less capital gains than Lloyd’s, so the benefits were a little smaller, but she was still able to give 14% more to the church than she would have given if she’d sold the stock and given the cash.
Lloyd said, “It just makes sense to make the most effective use of your money that you can. If I was to die today, our estate would have a big tax
future taxable dollars to make a gift to the church now and avoid the tax later on.”
Giving shares through the PCC is easy. At your direction, your broker electronically transfers your securi- ties to the PCC’s brokerage, which sells the stock soon after receiving the transfer. You will receive a tax re- ceipt for the full market value of the security on the day it is given and the proceeds of the sale (reflecting any change in value from the transfer and sale, minus any broker fees) will go to the PCC congregation, program or ministry you designate. While it can take a little longer than a cash gift, the benefits are great.
By sharing their story, Lloyd and
Linda are living out the call in Ro- mans 12:8 by leading others. Like many donors we talk to, they give out of love and because they want to participate in God’s mission—not because of the tax breaks. What ex- cites them about tax breaks is that it
allows them to give more than they thought.
You can donate securities as a gift- in-kind to The Presbyterian Church in Canada for any PCC congregation or ministry. Learn more at presbyterian. ca/securities.
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