Business Law, Real Estate Law, Taxation law

Real Estate Donations: A Proposal for Exemption from Capital Gains

Feb 16th, 2016

By Daniel Frajman

A 2015 federal budget proposal exempts the sale of real estate from capital gains tax if the sale proceeds are donated to a registered charity within 30 days of the sale (The capital gains exemption is calculated in proportion to the portion of sale proceeds that are donated). The proposal is currently scheduled to come into force for real estate disposed of in 2017 and afterwards. More details on the proposal can be found in my article that appeared in English here and in French here in the November 2015 edition of Canadian Tax Highlights published by the Canadian Tax Foundation.

This proposal echoes in some ways the rules enacted about 10 years ago allowing appreciated marketable securities to be donated to charity without triggering capital gains tax for the donor. Unfortunately, the current proposal for the donation of real estate proceeds does not exempt from tax the recaptured depreciation that often arises when a building is sold. Nevertheless we may, beginning in 2017, be entering an era when “closing agendas” for a real estate sale will include, as their last item, the post-closing donation to charity of all or a portion of the proceeds of sale.

Please do not hesitate to contact me for further information on the planning of charitable gifts and bequests, or other issues in this area of law, such as the establishment of private foundations and public charities - (including analysis of organizational purposes and activities, and establishment of “Canadian friends” and other cross-border organizations), donations under the US-Canada Tax Treaty, converting non-profit organizations into charities, creditor protection including transfers of securities and real estate, Canada Revenue Agency audits, and fundraising compliance.

Daniel Frajman, TEP, a shareholder of Spiegel Sohmer, a Montreal law firm, negotiates and drafts contracts for business and real estate sales and purchase transactions, leases, debt and equity financings, shareholders’ agreements, trusts, wills, and for non-taxable non-profit and charitable businesses.