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29 Donation in cash If the donation is made in cash, the corporation will have to sell the stock-listed security, generating a capital gain, and it may then deduct from its taxable income an amount equivalent to the eligible amount of the donation. After the donation, the net value for the corporation is $3,010, a sum which can be paid as a dividend. The shareholder would therefore receive a net after-tax amount of $1,660. We also have to quantify the impact of the tax accounts on the amount received by the shareholder. First, the CDA is increased by the amount of the non-taxable gain, that is, $4,000. The benefit this account provides is an amount that is not taxable when eventually withdrawn from the corporation. That means the tax savings offered by the CDA is equal to the change in the CDA times the non-eligible dividend rate, or $1,794. Then the RDTOH is calculated based on the corporation's annual taxable income. An RDTOH is created by the taxable capital gain, but also reduced due to the deduction of the donation. In net terms, there is an RDTOH loss of $1,840, and the RDTOH loss to the shareholder is equal to the lost RDTOH times the non-eligible dividend rate, or $1,015. With a donation in cash, the net value to the shareholder is $2,439 and their impoverishment is $4,440. Donation in kind If the donation is made in kind by the corporation to a recognized donee, no income tax will be charged on the increase in value and the corporation will benefit from a deduction in its taxable income equal to the eligible amount of the donation. After the donation, the net value for the corporation is equal to the income tax savings generated by the income tax deduction, that is, $5,017, an amount that can be paid as a dividend. The shareholder will therefore receive a net after-tax amount of $2,767. Of course, we have to quantify the impact of the CDA and the RDTOH. The CDA is increased by the total amount of the capital gain, $8,000, because this amount is not taxable. That means that the CDA offers the taxpayer a higher tax savings: $3,587. The RDTOH loss is higher, though. Since there is no income tax to pay on the gain, the reduction in the corporation's taxable income is higher, so the RDTOH loss for the shareholder is $1,692. If the donation is made by the corporation in kind, the net value for the shareholder is $4,663, and their impoverishment is $2,217. Conclusion Based on our comparison, a donation in kind is better, because there is less impoverishment. But is it better to give personally or through a corporation? Comparing net values and impoverishment, we can see that the decrease is lower when the donation is made through a corporation, whether it is made in cash or in kind. In short, the best option is to donate in kind, through a corporation. Personal Corporate Donation in cash financed by the sale of securities Donation in kind of stock-listed securities Donation financed by the sale of securities Donation of stock- listed securities Impoverishment due to the donation $4,711 $2,578 $4,440 $2,217 FEATURE ARTICLE

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