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The Art of GivingApril 23, 2018 Blog, Family, Giving, House and Home, Living Well, Planning Well
When it comes to giving generously, cash doesn’t have to be king. You can donate time, money, publicly-traded securities, even property like your art or car collection. Why give away a collection you’ve built and enjoyed over the years, do you ask? In some cases, your heirs may not be as passionate about your passion investments or hesitate to take on the upkeep of a sizeable collection. So you may consider donating the property instead of bequeathing it. The good news is that, in many cases, donating tangible property allows you to enjoy a donation tax credit as well as the feeling of sharing something you love with others.
Of course, there are some tax rules to consider, so it’s a good idea to talk to both your tax professional and financial advisor – as well as your designated charity and an appraiser – before donating your collection of art, antiques, collectibles, jewelry, vehicles or other tangible property.
In order to claim your charitable tax credit benefits, the organization must be a qualified recipient such as a Canadian registered charity or registered organization.
Keep in mind that collectibles generally come with ongoing expenses – for storage, insurance and maintenance. So, before you crate up an Emily Carr painting, consider:
Whether They Want It
Your family doesn’t want the collection, but who does? Current tax laws allow donations to public organizations that are willing to accept the items (e.g., art to museums and rare books to a university library).
You may have to report a capital gain or capital loss when donating capital property, personal-use property, or listed personal property. Listed personal property includes artwork, sculptures, jewellery, rare books, stamps, and coins. Donors may not claim capital losses on personal-use property.
Before you wheel over your car collection, find out what kind of property your chosen charity is willing to accept and under what conditions. Museums may not be interested in the upkeep, storage and maintenance of vintage vehicles, for example. They also may only be interested in the most important items in your collection. This may be a time to set aside your ego, look at your collection critically and decide if selling some of the lesser works might be better used to fund an endowment to preserve the remaining pieces for generations to come.
Whether You Can Relinquish Control
Think how hard it is to relinquish your favorite comfy chair to charity. It only gets harder when items that are close to your heart have considerable monetary value. You may be inclined to put some restrictions on how the property can be used (whether it must hang in the permanent collection or be included in the catalogue) or impose conditions on its future sale. However, retaining too much control could mean the transaction will no longer be considered a gift for tax purposes, or that the recipient may need court approval to change the terms of the agreement after you pass away. An unrestricted gift agreement between you and the donee is essential if your intention is to truly benefit the recipient.
Whether the Gift Is Worth What You Think
Valuations can be disputed, so get an independent, qualified appraisal for anything that may be worth more than $1,000. If the item’s value is less, there are several online sources to help you determine fair market value for your donated goods. Don’t forget to get a written receipt acknowledging the donation and its value.
Cultural property is considered anything from paintings and sculptures to books and manuscripts to ethnographic material. The property does not have to be of Canadian origin.
If you want your gift to be certified under the CPEIA, you need to contact the Canadian Cultural Proeprty Export Review Board (CCPERB). For contact information for the Review Board Secretariat, you can check the designated institutions and public authorities.
It may be determined that the item is of “outstanding significance and national importance” because of its: close association with Canadian history or value in the study of the arts or sciences. Certification by the CCPERB is only necessary if you want to treat your donation as a gift of cultural property to an institution designated by the Minister of Canadian Heritage. Capital gains on donations of certified cultural property are exempt from tax and the tax credit is not limited to 75% of net income.
Leaving a legacy
It is not necessary to obtain certification if you want to treat your donation as a regular gift to a registered charity or other qualified recipient without the additional tax benefits attributed to certified cultural property.
Refer to the Canada Revenue Agency website for further details about donations in kind.
Source: thetaxadvisor.com; artbusiness.com; Planned Giving Design Center; canada.ca
Please note, changes in tax laws or regulations may occur at any time and could substantially impact your situation. While familiar with the tax provisions of the issues presented herein, Raymond James Financial Advisors are not qualified to render advice on tax or legal matters. You should discuss any tax or legal matters with the appropriate professional.