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 if you donate:

• 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
• a share, debt obligation, or right listed on a designated stock exchange
• 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 a real servitude or under certain conditions, a personal servitude (for more details, see Ecologically gifts)

The inclusion rate of zero is extended to any capital gain realized on the exchange of shares of the capital stock of a corporation for securities listed in the first five bullets above that are then donated if the capital stock shares meet all of the following conditions:

• at the time they were issued and at the time of disposition, the shares included a condition allowing the holder to exchange them for the securities
• the securities are the only consideration received on the exchange
• the securities are donated within 30 days of the exchange

If 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, you are deemed to have a capital gain from the disposition of another capital property. In addition to any capital gain that would otherwise be subject to the zero inclusion rate discussed earlier in this section, 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 of the donation, in respect of the FTS class of property
• the total capital gains from the actual disposition

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, However, if you receive 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 the inclusion rate calculated on Schedule 3, Capital Gains or Losses.

The amount subject to the inclusion rate of zero is calculated using the following formula:

A x (B ÷ C)

Where

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 (or their cash proceeds) that you acquired through your employer's security option plan. To qualify, you must meet these 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 are entitled to claim a security option deduction on line 24900 for the acquisition of the security under a security option plan
• You disposed of the security (for gifts of the securities or mutual fund units themselves) in the year it was acquired, and not more than 30 days after its acquisition, by donating it to a qualified donee
• You directed a broker or dealer (for donation of the cash proceeds) to immediately sell the security and donate the proceeds to a qualified donee

The additional deduction reported on line 24900 is equal to 50% of the amount of the taxable benefit that you received.

These deductions 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 cannot claim a gift related to an option to acquire a property that is granted to a qualified donee until the qualified donee either exercises or sells the option:

Where the option is : 

A) exercised by the qualified donee, the amount of the gift is generally equal to:

• the FMV of the underlying property, minus
• any consideration that you receive from the qualified donee for the property and the option

B) sold by the qualified donee, the amount of the gift is equal to whichever is less:

• the result from A) above
• the result of:
  • the FMV of any consideration (other than a non-qualifying security of any person) received by the qualified donee for the option, minus
  • any consideration that you receive from the qualified donee for the option

Completing your Form T1170 and Schedule 3

Complete Form T1170, Capital Gains on Gifts of Certain Capital Property for all donations of these properties. Report these amounts on Schedule 3, Capital Gains or Losses as indicated on Form T1170.

Forms and publications

• Form T1170, Capital Gains on Gifts of Certain Capital Property
• Schedule 3, Capital Gains or Losses
• Guide P113, Gifts and Income Tax

Related topics

• Line 12700 – Taxable capital gains