Deduction for charitable donation of securities

Donation of securities - Paragraph 110(1)(d.01)

If the employee acquires a security under an option and donates it to a qualified donee the employee will be entitled to a deduction under paragraph 110(1)(d.01) of the Income Tax Act in addition to the option share deduction. In general, the deduction is equal to one-half of the security option benefit. It should be noted that if the value of the security is worth less when it is donated than when it was acquired, the deduction is based on the lesser of:

  • the employment benefit deemed by subsection 7(1) of the Act to have been received by the employee
  • the employment benefit that would have been deemed by subsection 7(1) of the Act to have been received by the employee, had its value at the time it was acquired been that lesser value

The employee can claim this additional deduction if the following conditions are met:

  • the donation must be made:
    • 30 days from the day the security is acquired
    • within the year in which the security is acquired
  • the employee must be eligible for the deduction under Security options deduction - Paragraph110(1)(d) of the Act
  • if the security is a share, it must be of a class listed on a prescribed Canadian or foreign stock exchange

By virtue of subsection 110(2.1) a deduction under paragraph 110(1)(d.01) may also be available where an employee, in exercising an option, directs the appointed or approved broker or dealer to immediately sell the security and donate all or part of the proceeds of the disposition to a qualified charity. The amount of the deduction must be prorated to reflect the portion of the proceeds that are donated.

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