Sam WattsThink Philanthropically

I want to take this opportunity to wish the readers of this column a very wonderful holiday season.  I also want to thank all of you for your commitment to supporting the many important philanthropic causes that matter in our city.

There is a well-established tradition of giving at this time of year. Readers will likely be very familiar with my persistent advice related to how to give. Be well-informed and give directly to organizations that are credible and well managed.  Avoid gimmicks and random giving. Avoid giving out of guilt. Give with the objective of leveraging your impact – not because an organization tells you they have needs. Every community organization has needs – donors give when an organization is meeting unmet needs.

“Let’s give. Let’s be agents of change. And happy holidays!”

One of the increasingly popular ways to donate is to employ a method that you may not know about. A donor can donate shares or securities to a charitable organization. I need to underline that this column does not purport to provide financial advice of any kind.  Prior to making any donation of shares or securities it is advisable to obtain professional financial advice. Donating shares from an investment portfolio can be advantageous but this is best explained in detail by someone who understands your financial realities and is qualified to provide guidance.

To briefly summarize how this works, an investor who donates shares to a registered charity is able to obtain a tax receipt for the full market value of the shares. The charitable organization then sells the shares, using an intermediary. The proceeds of the sale are deposited with the charitable organization and put to use immediately.

This kind of a transaction can be a great alternative to merely donating money or the funds from the proceeds of the sale of shares. For example, shares that were purchased for $1,000 and have increased in value over a number of years might have a current market value of $5,000. Selling them conventionally would require the investor to pay around $900 in capital gains taxes during the tax year when they were sold. Assuming that a donor decided to give the proceeds of $4,100 ($5,000 less the tax bill of $900) to a charity it could produce a net charitable tax credit of less than $2,000, depending on the person’s province of residence. On the other hand, if the investor donated the shares to a registered charity they would pay zero capital gains taxes and receive a charitable tax credit that is higher because they would have effectively donated $5,000 rather than $4,100.

A donor can donate shares or securities to a charitable organization.”

This method of donating is particularly relevant for investors who have held blocks of stock for a period of time and where cashing out would trigger a tax liability. Despite the recent softness in stock markets, cumulative gains in the past ten years have provided many savvy investors with a portfolio that they sometimes wish to trim. This, in turn, provides the philanthropically minded with incredible opportunities to support causes that matter to them.

This is indeed the biggest season for giving, but shouldn’t it always be the right time to give? Shouldn’t we always be seeking ways to be generous? We live in a wealthy country and many of us, this writer included, have benefited greatly from the opportunities that we’ve enjoyed. So let’s give. Let’s be agents of change. And happy holidays!

Sam Watts serves as the CEO of Welcome Hall Mission  He serves on several non-profit boards and is an appointed member of the National Housing Council of Canada.  He is the author of Good Work…Done Better