Each New Year brings about change, whether it's a New Year's resolution or other changes that affect you.  In 2008, for example, this change could be an increase in taxes!  In November, we discussed some of the tax benefits received from donations to charities.  This month, I'd like to further explain some of the newer tax savings the government is offering those who donate securities (shares, bonds, mutual funds) to a registered charity, including foundations.

There are numerous corporate changes that can cause taxes to rise even if you aren't selling your securities.  A great example is a major corporate restructuring.  Let me explain: let's say you hold shares in BCE, the major communication company.  BCE will make a change to their corporate structure, likely before March 31, and this will create additional income tax for anyone who holds BCE shares outside their RRSP that have gone up in value.

Let's say a Surrey resident bought 1,000 BCE shares in the past at $20 per share, and the day of the restructuring the shares are valued at $40.  The increase in share price from $20 to $40 results in a gain of $20,000.  One half of this ($10,000) will be taxed as a capital gain with income tax of approximately $2,000 to $4,400 depending on the resident's other income in 2008.  The individual can avoid this tax on the BCE shares if they donate the securities to a registered charity, or foundation.  Once donated, the government eliminates the tax on the gain and the individual will also receive a tax credit of approximately $17,500 on the $40,000 donation to apply against any other taxes due.

If the Surrey resident donated their shares to an arts endowment fund at the Surrey Foundation (no bias there!) before the BCE resructure date, it would create positive change for everyone involved.  The original $20,000 investment generated regular dividends for the investor over the years and total tax reductions of almost $22,000.  And the arts endowment fund (and their favourite charity) would receive $$40,000 from the share donation.  There is also an opportunity for the Foundation to double this donation through the BC Arts Renaissance Matching Grant Program (stay tuned for more on the Renaissance Fund in a later column).

The point is that everyone wins in this situation.  I encourage you to talk to your accountant or financial advisor who can help you ake advantage of these benefits.  You can also give us a call at 604.591.2699 or email info@surreyfoundation.org.