Capital gains realized on gifts of certain capital property
If you donated certain types of capital property to a registered charity or other qualified donee, you may not have to include in your income any amount of capital gain realized on such gifts. You may be entitled to an inclusion rate of zero on any capital gain realized on such gifts.
The inclusion rate of zero applies if you donate any of the following property:
- a share of the capital stock of a mutual fund corporation
- a unit of a mutual fund trust
- an interest in a related segregated fund trust
- a prescribed debt obligation
- certified ecologically sensitive land including a covenant or an easement to which land is subject or, in the case of land in Quebec, a personal servitude where certain conditions are met or real servitude gifted to a qualified donee other than a private foundation (for more details, see Gifts of ecologically sensitive land)
- a share, debt obligation, or right listed on a designated stock exchange
For donations of publicly traded securities, this treatment is extended to any capital gain realized on the exchange of shares of the capital stock of a corporation for those publicly listed securities donated when they meet all of the following conditions:
- at the time they were issued and at the time of disposition, the shares of the capital stock of a corporation included a condition allowing the holder to exchange them for the publicly traded securities
- the publicly traded securities are the only consideration received on the exchange
- the publicly traded securities are donated within 30 days of the exchange
In cases where the exchanged property is a partnership interest (other than prescribed interests in a partnership), the capital gain will generally be whichever of the following amounts is less:
- the capital gain otherwise determined
- the amount, if any, by which the cost to the donor of the exchanged interests (plus any contributions to partnership capital by the donor) exceeds the ACB of those interests (determined without reference to distributions of partnership profits or capital)
If you donate property to a qualified donee that is, at the time of the donation, included in a flow-through share (FTS) class of property, in addition to any capital gain that would otherwise be subject to the zero inclusion rate discussed earlier, you are deemed to have a capital gain from the disposition of another capital property equal to the whichever of the following amounts is less:
- the amount of your exemption threshold, at that time, in respect of the FTS class of property
- the total capital gains from the actual disposition
For more information, call the CRA at 1-800-959-8281.
If there is no advantage received in respect of the gift, the full amount of the capital gain is eligible for the inclusion rate of zero. However, if there is an advantage in respect of the gift, only a portion of the capital gain is eligible for the inclusion rate of zero. The rest is subject to an inclusion rate of 50%.
The amount subject to the inclusion rate of zero is calculated using the following formula:
A x (B ÷ C)
A = the capital gain
B = the eligible amount of the gift
C = the proceeds of disposition
Gifts of securities acquired under a security option plan
You can claim an additional deduction on line 24900 of your income tax and benefit return for donating shares of a corporation listed on a designated stock exchange or mutual fund units you acquired through your employer's security option plan. However, you must meet all of the following conditions:
- You acquired the security under an option that was granted to you as an employee of a corporation or a mutual fund trust.
- You disposed of the security in the year it was acquired, and not more than 30 days after its acquisition, by donating it to a qualified donee.
- You are entitled to claim a security option deduction on line 24900 for the acquisition of the security.
The additional deduction is equal to 50% of the amount of the taxable benefit, which may effectively exempt from tax the employment benefit associated with the exercising of the stock option.
When calculating the amount of the additional deduction that can be claimed on line 24900, you determine the employment benefit by using whichever of the following two amounts is less:
- the FMV of the security at the time of acquisition
- the FMV of the security at the time of disposition (through donation)
You may have a capital gain on the disposition of the security. For more information, see Capital gains and losses.
Granting of options to a qualified donee
You may not claim a gift in respect of an option to acquire a property that is granted to a qualified donee until such time as the qualified donee either exercises or sells the option. At that time, the amount of the gift that you may claim is generally equal to:
- where the option is exercised by the qualified donee, the FMV of the underlying property minus any consideration that you receive from the qualified donee for the property and the option
- where the option is sold by the qualified donee, whichever of the following amounts is less:
- the FMV of the underlying property
- the FMV of any consideration, other than a non-qualifying security of any person, received by the qualified donee for the option
Completing your Form T1170 and Schedule 3
On Form T1170, Capital Gains on Gifts of Certain Capital Property, report all donations of these properties, whether the inclusion rate is 50% or zero. Report the applicable amounts calculated on this form on line 13200 or line 15300 of Schedule 3, Capital Gains (or Losses).
The capital gain realized on an exchange of partnership interests for publicly listed securities that are then donated should not be reported on Form T1170. Instead, it should be reported directly on line 17400 of Schedule 3.
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