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

There have been over 20 tax initiatives of various kinds received during the last 13 years in Canada on capital gifts. Gifting to charity transcended 140% due to these tax initiatives.

Nevertheless, several factors force us to think about more advancement to these policies. Even though the amount of gifts are rising, the number of people donating is smaller. Charitable donations have become one-time large donations, instead of (more desirable) continuous contributions of smaller sums. This flow makes charitable organizations more susceptible to economic fluctuations.

Housing and private company shares don't qualify for capital gains exemptions. These policies therefore create a market imbalance. Owners and Charities are discovering they are now in a less favorable situation. Housing is not often donated as it is passed down in families.

Gifting real estate incorporates 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. Another problem comes for the charities themselves. A charity may experience more issues when they receive real estate gifting than capital. Property taxes, maintenance and environmental issues, all these will appear after such a bequeath.

Even though there are issues, there are choices possible. Malcolm Burrows tells of methods to make bequeaths of real estate.

The first possibility is a money bequeath after the real estate is sold. Acquiring cash from the property sale does away with any problems with valuations, tax and upkeep. The use of earnings from a some property sales donated to a charity has been possible since 2000 and the Income Tax Act. The seller should be able to donate a percentage or the whole amount if the legal difficulties were broadened.

Donations of real estate. Real estate valuations can be controlled which is the main issue with this type of donation. This can be solved by the use of independent real estate appraisers and by the requirement to hold the gifted property for a certain period of time (the report suggests a 10 years period), during which the new owner (the charity) cannot sell it.

Real estate symbolizes a huge share of both individuals' and companies' assets and it is fruitless to hold back the likelihood of the charitable donation of such assets. A great deal of work has been done in the field of tax exemptions legislation, but it has left the market unstable. Tax exemptions to this segment of real estate bequeaths would be the next prudent step to improve this inequality.

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Filed under: Foreclosure Properties

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