No Capital Gains Exemption for Donations of Real Estate and Shares of Private Corporations
Budget 2016 announces the Government’s intention to reverse proposals made in Budget 2015 with respect to donations of the cash proceeds from sales of real estate and private company shares. Budget 2015 proposed to exempt from tax capital gains incurred on the sale of real estate and private company shares to the extent the cash proceeds from the sale of such property were donated to a registered charity within 30 days of the sale. These changes were to take effect starting in 2017 and draft legislation implementing these changes had been released. We reported on these measures in past issues of this Newsletter. Budget 2016 confirms that the Government does not intend to go forward with these changes.
This announcement will come as a disappointment to some in the charitable sector, which had lobbied for relief from capital gains in respect of donations of real estate and private company shares. Others – for example, charities specifically eligible to receive gifts of ecological property – may not be disappointed by this measure.
The Budget does not affect the tax credits or deductions normally available for in-kind gifts of real estate or private company shares. Gifts of publicly-listed securities are also not affected by the Budget announcement, and will continue to be exempt from tax on capital gains.
Investments by Charities in Limited Partnerships Permitted
The Budget confirms the Government’s intention to “proceed with tax and related measures, as modified, to take into account consultations and deliberations since their announcement or release, relating to … the acquisition or holding of limited partnership interests by registered charities.” As reported previously in this Newsletter, Budget 2015 introduced relieving provisions allowing direct investment in limited partnerships by registered charities provided certain conditions are met. It appears that the Government will preserve this change.