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Donation of Securities in Canada Expected to Surge, Great Potential for Future

(May 7, 2007) A new study by TD Financial Group in Canada predicts that gifts of securities to charities not only increased dramatically in 2006, but also the potential for such gifts remains largely untapped.

The special report, Donating Securities Makes Good Financial Sense, states that while final data are not yet available for 2006, anecdotal evidence suggests that there will be a surge of donations of gifts of securities to charity. The report was published to coincide with the one-year anniversary of the date (May 2, 2006) that the Canadian federal government exempted gifts of securities to charity from the capital gains tax.

“We’ve definitely seen an increase in donations of securities over the past year, and I believe we’ve just scratched the surface,” said Jo-Anne Ryan, vice president, Philanthropic Advisory Services and executive director of the Private Giving Foundation launched by TD Waterhouse, in a press release about the study. “We need to continue to get the message out to Canadian investors that donating stocks offers a major advantage.”

Growth in Capital Gains = Strong Giving Incentive

Even more importantly, the report finds that there is great potential for even larger increases in these types of gifts. Statistics Canada estimates that Canadians held shares worth a market value of C$1.4 trillion at the end of 2006. Approximately half of that value (C$700 million) was attributable to capital gains, and that figure could reach close to C$2 trillion over the next decade.

The incentive to contribute securities to charity is quite powerful since donors not only avoid the capital gains tax, but also receive a tax credit for their donations. The report notes that, “donating securities to a charity is superior to selling the securities and then donating the cash received.”

The report also provides strategies to donors on how and when to make contributions of appreciated securities. Donors should consider giving the securities that have experienced the greatest capital gain per share in order to maximize the incentives. In addition, they may wish to make a contribution when an unexpected taxable event occurs, such as a merger or acquisition. Donations of shares acquired by exercising employee stock options are also exempt from capital gains taxation.

The full report is available online free of charge.

TD Bank Financial Group, headquartered in Toronto, is an international financial services corporation that serves more than 14 million customers around the world.

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