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BMO Financial Group Applauds Federal Government's Promise to Remove Capital-gains Tax on Stocks Donated to Charities

The Federal Government's decision to remove the capital-gains tax on listed stocks donated to charities is the right thing to do, because it will encourage the continuation of an upward trend of individual giving that government helped to initiate about ten years ago, according to Marvi Ricker, Vice-President and Managing Director, Philanthropic Services at BMO Harris Private Banking.

Ricker noted that when the government made a number of changes in the rules for giving in 1996 there was an immediate increase in donations. First they allowed gifts of assets other than cash to be donated to charitable organizations and then they increased the tax credit to 75 per cent of an individual's taxable income from 50 per cent. In 1997 the capital gains inclusion rate for appreciated marketable securities was cut in half and the related donation claim was also increased. As a result of these measures the value of publicly traded securities donated to charities almost tripled and the number of donors rose approximately five-fold.

"Once these tax incentives came into effect, in the late nineties, there was a big impact on the charitable sector and the giving curve has continued to go up," Ricker said. "The incentives that the government has announced today will make it more attractive for individuals to donate publicly traded stock that has appreciated."

"Health care and education costs are two big-ticket items that have traditionally relied almost entirely on government support but this has changed now because of the enormous cost. As a result, individuals are expected to contribute to the charities that they are concerned about and they are increasingly able to do so as the wealth in Canada has increased significantly," said Ricker.

"However, there is real donor fatigue out there in the sense that people are overwhelmed by the smaller $50 and $100 requests. People would rather give a significant amount and know that their money is going to be used in a way that is meaningful and is going to have an impact," she said.

"The days of just writing a cheque and forgetting about it is dying.  People want to be involved with the issues they support and they want to know that their money is being used in a good way, in an effective way, and for the cause that they had intended. Anything that makes it easier for them to give a large amount such as decreasing capital gains on appreciated shares is all for the good."

Ricker was also pleased to see that the government intends to consult with private foundations and other interested parties to develop rules that would allow it to extend the capital gains exemption for listed securities to donations to private foundations. "We are happy to see that the government has acknowledged the need for further consultation and we look forward to hearing more about potential rules to deal with private foundations," she said.

In making her comments, Ricker acknowledged the contribution of a former colleague, Donald K. Johnson, past Vice-Chairman of BMO Nesbitt Burns, who has been an outspoken advocate for the measures that the government has taken today. "The charitable sector owes a great debt to Don Johnson for his relentless pursuit of the government on this issue over the past several years," said Ricker.

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