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Since 1996 the giving of charitable gifts of capital has been improving in Canada. Malcolm Burrows from C D Howe Institute conveys in the recent report Unlocking More Wealth: How to Improve Federal Tax Policy for Canadian Charities that there is time to make the following step; extending capital gains exemptions to donations of real estate.

For the preceding 13 years there have been many tax inducements offered in Canada relating to capital gifts. The general effect on the charity environment evaluated in the volume of gifts was positive; charitable giving grew by 140%.

Just because there is a rise in gifts doesn't mean there is no room for advancement. The volume of people donating is shrinking even though the gross amount of gifts rose. Continuous contributions of lesser amounts are the more agreeable option, but charities are finding the gifts are coming as large one off donations. Exposure to economic variations is an unacceptable side effect of have little in the way of regular donations.

The ramification of these policies also resulted in noticeable market imbalance, as real estate and private company shares are not accepted for capital gains exemption. Owners and Charities are finding out they are now in a less favorable situation. In truth, real estate is very seldom donated.

Donating real estate incorporates some challenges. Policy makers need to work out a realistic market cost of an bequeathed property. This problem can be increased if the person gifting do not give an accurate value. Another issue comes for the charities themselves. A charity may experience more problems when they receive real estate gifting than capital. Property taxes, maintenance and environmental perplexities, all these will appear after such a donation.

These difficulties shouldn't present unconquerable barriers. Malcolm Burrows explains ideas to make gifts of real estate.

One of these is by selling the real estate at the outset, then gifting the money. Acquiring money from the property sale does away with any problems with valuations, tax and upkeep. Since the year 2000 it has been acceptable to sell a certain property and use the earnings for charitable intentions, thanks to the Income Tax Act. Expanding the legal base to accept real estate properties should allow for any percentage of the sale to be bequeathed.

If someone wants to make a donation of real estate. Property value manipulation is one of the main problems with real estate donations. Difficulties like this can be resolved in a variety of ways. This can be done by not releasing the property to be sold by the charity for up to 10 years and the services of independent real estate appraisers.

It would be at great detriment to charities if these type of donations were discouraged as real estate is a large proportion of companies' and individuals' assets. 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. Tax exemptions to this area of real estate gifts would be the next logical step to improve this inequality.

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