VEHICLES FOR GIVING: TECHNICAL ASPECTS OF FUNDRAISING

1. VEHICLES FOR GIVING: TECHNICAL ASPECTS OF FUNDRAISING THOMPSON DORFMAN SWEATMAN LLP PETER GLOWACKI and LEILANI KAGAN

3. TAXATION OF CHARITABLE GIFTS Individuals: credits to maximum of 75% of net annual income exceptions: �total cultural gifts� or �total ecological gifts� credits up to 100% of net income in year of death unused charitable donation credits may be carried forward five (5) years

4. TAXATION OF CHARITABLE GIFTS Corporations: corporation will receive a deduction (not credit) from income example: $500 donation = $232 tax deduction from income

5. OUTRIGHT GIFTS Cash lump sum gift or periodic (monthly, annual) Donor-Advised Funds Designated Gifts

6. OUTRIGHT GIFTS Non-Capital Property Artwork Jewellery Vehicles Collectibles Tax Treatment 3 year rule

7. OUTRIGHT GIFTS Capital Property Cottage, buildings Land Ecological property Publicly-traded securities Private company shares Cultural property Tax Treatment beware advantage to donor

8. OUTRIGHT GIFTS Publicly-Traded Securities Securities trading on prescribed stock exchange Include shares, interest in mutual funds, prescribed debt obligations Life Insurance

9. BEQUESTS Gifts made by Will Specific bequests Residual interest bequests Contingent bequests Residual interest trusts Charitable remainder trusts Acceptance by charity

10. TRUSTS Two principal types of trusts: Testamentary trust Established by Will Administered by executors Three �certainties� under law Inter vivos trust Created during individual�s lifetime

11. TRUSTS Charity as Beneficiary of Trust Beneficiary during �life� of trust Residual beneficiary Appropriate documentation Income producing property or non-income producing property

12. TRUSTS Tax treatment: Testamentary trust: marginal rates, flexibility with fiscal year-end Inter-vivos trust: highest marginal rate; Dec 31st fiscal year-end Receipting: Clear intention to donate to specific charity Ascertainable amount No discretionary capital encroachments by the trustees of the estate or others

13. DONOR-ADVISED FUNDS and ENDOWMENTS Donor-Advised Fund established by gift to a charity (typically a foundation) Donor permitted to advise charity on how wishes annual earnings from gift to be applied Endowments Donor wishes to make long-term gift Typically, at least 10 years Appropriate documentation required

14. DESIGNATED GIFTS Donor gifts property with specific statement of purpose or designation for use of gift Testamentary Inter vivos Fetter discretion of charity as to how best allocate resources Acceptance by charity

15. PUBLICLY-TRADED SECURITIES Marketable Securities Shares, interest in mutual funds, prescribed debt obligations on prescribed stock exchange Donor gifts securities to registered charities, public foundations or private foundations Transfer effected through broker or financial advisor

16. PUBLICLY-TRADED SECURITIES Marketable Securities: Tax Treatment Receipt equal to fair market value (FMV) on date securities received by charity Deemed disposition at FMV Capital gain = FMV less adjusted cost base (ACB) Capital gain included in income = nil

17. PUBLICLY-TRADED SECURITIES Flow �Through Shares: Donor invests in natural resource sector Canadian Exploration Expenses (CEE) and Canadian Development Expenses (CDE) flowed-through to shareholder to reduce investment costs Donor gifts shares to charity Charity sells on open market

18. PUBLICLY-TRADED SECURITIES Flow-Through Shares: Tax Treatment Donor deducts CEE and CDE flowed-through from company (must own shares on Dec 31st) Reduces investment cost to nil Reduces ACB to nil Donation of shares results in large capital gain, but nil inclusion for tax purposes

19. PUBLICLY-TRADED SECURITIES Example: cost of investment $100,000 less expenses deducted ($100,000) net cost of investment $ nil FMV at date of donation $200,000 capital gain on shares $200,000 capital gains inclusion rate $ nil tax credit $92,800 Note: even if no gain on investment (FMV $100,000) donor receives tax credit of $46,400 and has investment cost of $nil

20. PUBLICLY-TRADED SECURITIES Flow-Through Shares Gifted by Corporation Donor controls corporation that owns or acquires flow-through shares Donor�s corporation deducts CEE and CDE Donor�s corporation gifts shares to charity Capital gain increase Capital Dividend Account Tax-free dividends paid to donor Net result: no investment cost, no capital gain inclusion, tax deduction for donation, tax-free dividend for shareholder

21. LIFE INSURANCE Option One: Donor buys insurance and designates charity as beneficiary Donor pays premiums On death, insurance paid to charity (36 months) Tax treatment: Receipt issued for amount of proceeds No probate fees

22. LIFE INSURANCE Option Two: Donor buys insurance and transfers ownership policy to charity Charity designated as beneficiary of policy Donor pays premiums On death, insurance paid to charity (36 months) Tax treatment: existing policy vs. new policy No probate fees

23. LIFE INSURANCE Option Three: Donor donates property to charity Donor purchases insurance policy equal to FMV of donated property On death, insurance paid to charity (36 months) Tax treatment: Capital gain on donated property (unless marketable securities) Tax credit for FMV of property On death, insurance proceeds tax-free to estate and beneficiaries

24. RRSPs and RRIFs Donor designates charity as beneficiary of Registered Retirement Savings or Registered Retirement Income Fund Funds must be received by charity within 36 months after death Tax treatment: Receipt issued on date funds received One year carry-back for unused credit

25. CHARITABLE GIFT ANNUITIES Donor contributes funds to charity in exchange for guaranteed payments Payments may be combination of investment income and capital Registered charities only; not available to foundations Review charity�s constating documents, bylaws

26. CHARITABLE GIFT ANNUITIES Option One: Charity invests donated funds Investment income funds annuity payment Excess used by charity for charitable purposes Risk of insufficient funds Charity must use other sources of funding

27. CHARITABLE GIFT ANNUITIES Option Two: Charity purchases annuity from third-party insurance company Insurance company guarantees payments Less risk to charity

28. CHARITABLE GIFT ANNUITIES Tax treatment: Charity issues receipt for �gift� portion of donor�s contribution �gift� portion is difference between donor�s total contribution and cost of funding annuity Amount of annuity must be determinable

29. CHARITABLE GIFT ANNUITIES Example: Donor is 80-year old male Pays $60,000 to charity Acquires annuity of $5,000 payable for life Based on life expectancy of 89 Annuity costs $45,000 ($5,000 x 9 years) Gift is $15,000 ($60,000 less $45,000)

30. QUESTIONS? Thank You Peter Glowacki and Leilani Kagan