In October, federal finance minister Paul Martin announced some good news for charities. The 1997 budget measure that provided special tax assistance for donations of publicly traded securities to charities, which was previously scheduled to expire on December 31, 2001, will now be made permanent.

Under the terms of Martin's last "mini-budget" of October 2000, the capital gains "inclusion rate" on appreciated property was reduced to 50 per cent. So now, when appreciated property is sold, 50 per cent of the gain is subject to tax rather than 66 per cent as before.

This change also makes gifts of listed securities even more attractive. Beginning with the 1997 Federal Budget, the amount of gain subject to tax when listed securities are contributed to charity is only one-half of the amount subject to tax when they are sold.

Now that only 50 per cent of gain is taxable upon a sale, the amount taxable in the case of a gift has been further reduced to 25 per cent.

"From the data available, it appears that this measure has been an effective additional incentive for people to make donations to charities," said Minister Martin. "This is exactly what the measure was designed to do." Data for the 1997-2000 period show that both the number and the value of donations of securities have significantly increased. They also show that a broad range of charitable areas - education, health, religion, welfare - have benefitted from it.

And that's good news for donors, too. Because of the favourable treatment of capital gain, it may be better for you to give appreciated securities like stocks and bonds rather than cash to your favourite charity. The maximum amoung of charitable gifts that is creditable in any one year is 75 per cent of net income. Excess contributions can be carried forward and used over the next five years. When you make gifts of appreciated property, your contribution limit is 75 per cent of income from other sources plus 100 per cent of the taxable gain in your gift.

Bottom line: Your credit will always exceed tax on the gain, and you will always have net tax savings.