Ryma Nasrallah has built her career on philanthropy. A partner at Borden Ladner Gervais LLP, she specializes in advising registered charities and non-profit organizations, and has often helped charitable organizations and foundations get off the ground. She recently took it one step further and made it personal, making her largest ever donation to the Campaign to Create Tomorrow. With an ambitious $500-million fundraising goal, it is the largest campaign in our city’s history.
Now, on top of her roles as the Communications Officer of the Canadian Bar Association’s Charities and Not-for-Profit Section and serving on the executive of the Ontario Bar Association’s Charities and Not-for-Profit Section, Nasrallah has joined The Ottawa Hospital Foundation’s Board of Directors.
When it came time to consider a gift to this historic campaign, Nasrallah explains she was genuinely inspired by all the donors who had generously contributed to the Campaign to Create Tomorrow. “I wanted to push myself to make my most significant donation in hopes I would inspire others around me to do the same and help reshape the future of healthcare in Ottawa.”
She adds, “I hope my gift will bring The Ottawa Hospital one step closer to delivering a new, state-of-the-art hospital. Building a new hospital is a once-in-a-generation opportunity, and I believe we all have a duty to do what we can to help. Every dollar counts.”
Understanding gifts of securities
Nasrallah brings a great deal of expertise to the Foundation’s board, and with that, she’s able to provide donors with a better understanding of the type of gifts that can support the hospital, including gifts of stocks/securities. In fact, she says the benefits of gifting publicly listed securities are threefold.
“First, gifting publicly listed securities entitles the donor to an official donation receipt equal to the fair market value of the securities on the date they are donated to a registered charity,” she says. “An official donation receipt will result in a charitable deduction for corporate donors or a non-refundable charitable tax credit for individual donors that will reduce income taxes.”
Secondly, she explains the donor may be exempt from paying any capital gains tax on the appreciated value of the publicly listed securities. In order for that to happen, Nasrallah says the donor must gift the publicly listed securities directly to the registered charity.
“If the donor sells the securities in the open market and donates the cash proceeds, they will be subject to income tax on any resulting capital gain. By donating the publicly listed securities directly to a registered charity, the donor benefits by paying no capital gains tax on the disposition, and the charity benefits by receiving the full value of the securities.”
Finally, if the publicly listed securities are held by a corporation — including an individual’s holding company or business — the full amount of the capital gain is added to the corporation’s capital dividend account (CDA). Amounts in the CDA allow the corporation to pay tax-free dividends to its shareholders.
According to Nasrallah, usually, only half of a capital gain is added to the capital dividend account. “This extra amount in the CDA can be distributed to the shareholders of the corporation on a tax-free basis, which results in additional tax savings.”
Proposed tax changes on the horizon for gifts of securities
There are big changes on the horizon for gifts of securities. The 2023 federal budget introduced new rules for the Alternative Minimum Tax (AMT) regime that will increase the tax cost for individuals earning more than $173,000 donating publicly listed securities to registered charities. The AMT is a parallel tax calculation that allows fewer deductions, exemptions, and tax credits than under the ordinary income tax rules. The taxpayer pays the AMT or regular tax, whichever is the highest.
“As a result of these new rules, any capital gain on donated publicly listed securities will no longer be tax free. Instead, 30 per cent of the capital gain will now be taxable. Also, the charitable donation tax credit will be cut in half,” she says. “An individual donor may be able to recover the extra tax paid over a seven-year period, but it depends on the amount of deductions and credits claimed in those years.”
These proposed changes will come into effect in January 2024. So, Nasrallah’s best advice is to take full advantage of the current tax benefits. “The best time for individual donors to gift publicly listed securities is before December 31, 2023.”