Policies on Tax and Property Benefaction

In Canada since 1996, the situation for charitable gifts in relation to capital has been improving. A paper by Malcolm Burrows from C D Howe Institute called Unlocking More Wealth, discusses augmenting capital gains exemption for donations of real estate donations and the relation to Canadian Federal Tax policies for Charities.

There have been over 20 tax incentives of differing kinds brought in during the last 13 years in Canada on capital gifts. The overall effect on the charity environment evaluated in the volume of gifts was positive; charitable giving grew by 140%.

Just because there is an increase in gifts doesn't mean there is no space for improvement. While the total volume of gifts rose, the quantity of donors has been shrinking. What is prominent is that donations are coming as a one time only big donation rather than continuous, but smaller, contributions. Vulnerability to economic fluctuations is an undesirable side effect of have little in the way of regular donations.

Property and private company shares don't qualify for capital gains exemptions. These policies therefore cause a market imbalance. Charities and owners are left with unfavourable circumstances. Property is not often donated as it is passed down in families.

Bequeathing real estate includes some challenges. Policy makers need to work out a reasonable market cost of an donated property. This problem can be increased if the person donating do not give an accurate value. Problems can emerge for the charity to whom the bequeath has been bequeathed too. Real Estate bequeathing bring more pressures than capital bequeathing to a charity. Charities will find these predicaments include tax and maintenance problems once the property is under their control.

These problems are not insurmountable. Malcolm Burrows presents two potential ways of making real estate donations.

One of these is by selling the real estate first, then donating the cash. Acquiring cash from the property sale bypasses any problems with valuations, tax and upkeep. The Income Tax Act has made possible for the cash from some property sales to be used as revenue since 2000. Increasing the legal base to contain real estate properties should allow for any percentage of the sale to be donated.

If someone wants to give a bequeath of real estate. Property value altering is one of the main problems with real estate donations. Making sure the new owner is not permitted to sell the property for a number of years and the services of independent real estate appraisers are a couple of ways around this issue.

Deterring real estate donations would have a negative blow upon charities, a big proportion of assets from companies and individuals is real estate. Tax exemption legislation has had a lot of work completed on it over the last few years but there is still a way to go to even up the market. To reform the inequality there needs to be a way of approaching the tax exemption of this area of real estate gifting.

Photo: Faces Helped By Charity Water by Chris Sacca