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For more 
information contact 

Barry Johnson
BA, CFP, CLU, CHFC

Charitable Planning

Planning and strategizing how to accomplish one’s objectives includes the most efficient use of one’s resources. Charitable planning is no different. Recent federal budget changes and other developments make it more attractive and easier to make charitable donations.

For example, two unrelated events have created better opportunities for charitable giving:

  1. Mutual life insurance companies have demutualized. This has created a tremendous amount of new-found wealth in the community.
  2. The 1997 federal budget introduced measures that reduced the inclusion rate of capital gains realized on certain property gifted to public charities from three-quarters to three-eighths of the capital gain. It should be noted that this provision was introduced with a sunset date of 2002.

The following examples compare the impact of different strategies where an individual desires to donate shares of a demutualized company valued at $50,000. The shares have a zero adjusted cost base. It is assumed that the donor is in a 50% federal/provincial income tax bracket.

Example 1: The individual sells the shares on the open market, pays the tax due, and donates the balance in cash to a charity.
Proceeds of disposition . . . . . . $50,000
Less: adjusted cost base . . . . . . . . . . . 0
Capital gain . . . . . . $50,000
Taxable capital gain (75% of $50,000) . . . . . . $37,500
Income tax (50% of $37,500) . . . . . . $18,750
Amount available for donation
($50,000 - $18,750)
. . . . . . $31,250
Tax credit on donation (50% of $31,250) . . . . . . $15,625

Bottom line: The donor keeps $15,625 and the charity gets $31,250.


Example 2: The individual donates the shares to the charity.
Deemed proceeds of disposition . . . . . . $50,000
Less: adjusted cost base . . . . . . . . . . . 0
Capital gain . . . . . . $50,000
Taxable capital gain (37.5% of $50,000) . . . . . . $18,750
Income tax (50% of $18,750) . . . . . . $9,375
Tax credit on donation
(50% of $50,000)
. . . . . . $25,000
Tax refund ($25,000 - $9,375) . . . . . . $15,625

Bottom line: The donor keeps $15,625 and the charity gets $50,000. The charity will not be taxed when it converts the shares to cash. As a result, the charity will net an additional $18,750 compared to the strategy employed in example 1, while the donor gets to keep the same amount. Should the donor not want to keep anything from the demutualization, an additional cash donation of $31,250 could be made. With the new tax credit on the cash donation and the existing tax refund, the donor would break even.

© Copyright 2000
Excerpted with permission, from Comment, a publication of the Canadian Association of Insurance and Financial Advisors (CAIFA). All rights reserved.

This commentary is published by the Canadian Association of Insurance and Financial Advisors (CAIFA) in consultation with an editorial board comprised of recognized authorities in the fields of law, life insurance and estate administration.


The Canadian Association of Insurance and Financial Advisors (CAIFA) is Canada’s largest voluntary professional association of financial advisors with 18,000 members from coast to coast. CAIFA has been setting conduct standards and providing professional development for its members for over 90 years.


The articles in Comment are not intended to provide legal, accounting or other advice in individual circumstances. Seek professional assistance before acting upon information included in this publication.

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