Let’s assume that you have a security in your investment portfolio, 1000 shares of Bell Canada “BCE” that you acquired years ago in January 2006 at $27.81.
The actual value of BCE shares closed on Friday 2019/10/04 at $48.63
So, let’s look at 2 scenarios and how you can maximize your tax benefits.
Scenario # 1:
- Sell the 1000 shares on Friday 2019/10/04 at the closing price of $48.63 for a total of 48,630 less selling commission which we will ignore for the purpose of this example
- You take the proceeds of $48,630 and write a cheque to SMSD The Chapel for the $48,630
- You will receive a Donation Tax Receipt in the amount of $48,630
- When you file your income tax return at the end of the year you will have to declare a Capital Gain of $20,820 which you will have to pay income taxes on 50% of your Capital Gain or $10,410 which will be added to your other taxable income
- Your tax bite will be based on the tax rate based on your total taxable income
- Let’s assume a low tax rate of 30%, your income tax payable will be $3,123
Scenario # 2:
- You do not sell your 1000 BCE Shares, but you donate the shares to SMSD The Chapel on Friday 2019/10/04
- SMSD The Chapel will issue to you a Donation Tax Receipt in the amount of the closing Market Value of the BCE Shares on the same date which is $48,630
- Since you did not sell the BCE Shares but donated them to The Chapel, you have no Capital Gain nor taxes to pay on the donation transaction
- Your benefit in following Scenario # 2 is $3,123 in Income Tax Savings