Since 2006, when the tax law changed to zero capital gain on the donation of public stock, I have delivered well over a thousand presentations on the merits of purchasing charity flow-through shares. Essentially, investors purchase flow-through shares for the 100 per cent tax deduction and donate them to charities of their choice.
The shares are then sold to a pre-arranged liquidity provider at a discount a moment later, eliminating any stock market risk. The charity receives the cash proceeds, but issues a donation tax receipt to the donor, generating a second 100 per cent tax deduction.
Some investors choose to keep the cash proceeds from the liquidity provider for themselves, generating at least a 25 per cent rate of return via tax savings with no stock market risk. By combining these two tax policies, both older than your RRSP, investors have been able to reduce their taxes, and if they wish to, give those deductions to charities of their choice, for a second tax deduction.
It’s a tried-and-true model – the GIC of tax deduction, I like to say – with nine advanced tax rulings that have enabled thousands of tax filings and resulted in more than a billion dollars donated to charities all across Canada.