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TAX BENEFITS OF DONATING TO THE COMOX VALLEY LAND TRUST
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Donations made to the Comox Valley Land Trust can provide benefits to you beyond the satisfaction of helping to protect some of our area´s dwindling green spaces, agricultural and forest lands. The tax benefits can vary greatly depending on the value of your gift, its form (monetary or transfer of land title) and your personal tax situation.
The following information is of a general nature. Your accountant and lawyer will be instrumental in deciding how and when you can benefit most from a charitable donation.
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Monetary Gifts
An outright gift of cash is the simplest way to receive a tax credit. Your donation will earn you a registered charity official receipt which can be used to reduce the tax you pay for the year you donate. Any unused amount can be carried forward for the next five years. The amount eligible for the calculation of the tax credit for cash donations is 75% of your net income for the year.
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Capital Gifts
An alternative to a cash donation is a donation of capital property such as land. Your donation receipt will be for an amount equal to the fair market value of the property you are donating. A benefit of this type of donation over a cash donation is that the amount eligible for a tax credit is increased, in some cases to 100% of your net income for the year.
An important consequence of donating capital property is the fact that Revenue Canada considers the donation to be a disposition of the property. Since the disposition will be deemed to occur at fair market value, you are likely to have a taxable capital gain to report on your tax return (if your property is worth more than you paid for it). The taxable amount will be 66% of your gain or 33% if the land is certified as ecologically sensitive. This income inclusion can cause other tax “side effects” such as a reduction in GST Credits or an Old Age Pension clawback.
Land donations and their related tax benefits are complicated and each situation requires professional assistance to calculate the most beneficial strategy. With the optimal plan, the tax benefits may be significant, reducing or eliminating your tax payable for up to six years.
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Ecological Gifts
Donations of land, easements and covenants that qualify as ecologically sensitive lands are not limited to a percentage of your net income. To be eligible as an ecological gift, the donation must be certified by the Minister of Environment as land that is important to the preservation of Canada’s environmental heritage.
If you are donating title to the land you will receive a donation receipt equal to the fair market value of the land. If you are donating an easement or covenant you will receive a receipt for an amount equal to the greater of a) the fair market value of the restriction, or b) the amount of the reduction of the land’s value resulting from the gift.
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