Donating Capital Property
Income Tax Act s. 38(a.1), 38(a.2), 118.1(1)
When capital property is donated, there is a disposition
for tax purposes, which may result in a capital gain. The fair market
value (FMV) of the property donated is used as the proceeds of disposition,
and as the amount of the donation. In some circumstances it may be
helpful to designate the proceeds amount to be an amount less than FMV.
See our article on the election for
designating the proceeds of donated property.
If any "advantage" was received (compensation or other
benefits) in return for the donation (e.g., tickets, meals), the eligible gift
for purposes of the donation claim is the proceeds of disposition less the
advantage received.
Another benefit of donating capital property is that your
total donations limit will be increased by 25% of the taxable
capital gain on gifts donated, up to a maximum total limit of 100% of net income. See the CRA topic "calculating
your increased donations limit" in the publication P113
Gifts and Income Tax.
Capital gains can be eliminated by donating certain
types of capital property (qualified investments, prescribed
debt obligations, or ecologically sensitive land) to
qualified donees (see the CRA
definition for a qualified donee). The taxable capital gain is eliminated for this type of donation
made after May 1, 2006. For donations of this type of property made before May 2, 2006, the taxable
capital gain is 25% instead of 50%.
CRA has the following information on their site regarding
donating capital property:
