# Deed of Gift Taxation Questions



## Bob Smith 1001 (Jul 14, 2016)

Hello--Was wondering about the tax implications of doing a deed of gift of worthless securities in an unregistered brokerage account. I have several worthless securities in my brokerage account that I was told by my brokerage can be removed by doing a deed of gift to the brokerage. 

Many of the stocks would be gifted to the brokerage at no gain or loss to me and others at small losses. As far as I can foresee, there is no possibility of ever reaping capital gains on any of these stocks.

Is this a mandatory tax reporting event even though I would incur no gains or only small losses at the time of gifting? IOW, and this is probably a dumb question, is it optional for me to report these gifts since I won't have a gain? 

If so, what forms are required, Schedule 3 and/or just T-1170? Others?

Thanks for any advice.


----------



## Eclectic12 (Oct 20, 2010)

Bob Smith 1001 said:


> ... I have several worthless securities in my brokerage account that I was told by my brokerage can be removed by doing a deed of gift to the brokerage.
> 
> Many of the stocks would be gifted to the brokerage at no gain or loss to me and others at small losses. As far as I can foresee, there is no possibility of ever reaping capital gains on any of these stocks ...


From this article ...
http://www.theglobeandmail.com/glob...hares-are-worthless-now-what/article16287668/

The benefit of doing this is that one can use the broker's reports to report on schedule 3, part 3 the capital loss (CL) that has occurred, particularly where one can no longer sell the stock (ex. stock was delisted). It also allows the broker to take the security name off the monthly/annual reports.

What the investor is giving up for this convenience is that should the company shares return from the dead - the broker owns them instead.


I personally have only done the part up to "Your broker may be able to facilitate an even simpler solution".  This is to report the loss then have a notation of a cost base of zero, in case the stock returns from the dead. It is annoying to have the defunct shares still listed but no interaction with the broker was required.




Bob Smith 1001 said:


> ... Is this a mandatory tax reporting event even though I would incur no gains or only small losses at the time of gifting? IOW, and this is probably a dumb question, is it optional for me to report these gifts since I won't have a gain?


Yes ... it will show up on the annual selling report, which CRA will receive.


The point here is to get CRA to recognise the capital loss (CL). Once that is registered, you can go back three years to cancel out capital gains (CG) to pay no income tax or carry the CL forward indefinitely until there is a CG that can be reduced/canceled.

For example, if the CL is recorded as $500 on one's 2016 tax return where one had a CG of $700 in 2014. One can apply the CL of $500 to the 2014 tax CG of $700, reducing it to $200. This will then generate a refund for the CG taxes paid in 2014. 

Or if the CL is recorded in 2016 then one sells a stock for a $900 capital gain in 2017, one can use the CL to reduce the capital gain to $400 on the 2017 tax return. Reporting a lower CG means paying less capital gains taxes.


I would suggest learning about the benefit of capturing/using capital losses. It sounds like you are not aware of the benefits and may be overpaying capital gains taxes. 




Bob Smith 1001 said:


> ... If so, what forms are required, Schedule 3 and/or just T-1170?


Schedule 3, part 3 "Publiclly traded shares, MF units ... " is all I have used.

The top of the T1170 says it's for when one donates to charity (which is usually when there is a sizeable CG).


Cheers


----------



## Eclectic12 (Oct 20, 2010)

Here's some info on capital losses ...
http://www.cra-arc.gc.ca/tx/ndvdls/...cm/lns101-170/127/lss-ddct/gnrl/menu-eng.html
http://www.taxtips.ca/filing/capitallosses.htm


Cheers


----------



## Bob Smith 1001 (Jul 14, 2016)

Hi Eclectic12


Thanks for the info!

I believe the rep at the brokerage said that when you do a deed of gift they don't generate any T-5008 or any other trading summary/tax notifications to the client (not sure if CRA gets something else from the brokerage regarding the transaction), they just go out of your account and into their inventory. The client is to rely on his/her own records to determine if there is anything reportable tax-wise. 

Some of the stocks are restricted issuance from defunct companies, do not trade and are presumed worthless. 

I looked again at the T-1170 and it says it's for reporting donations to a registered charity or other qualified donee (not sure if a brokerage is a qualified donee?).

Anyway, I'm just looking to rid myself of the shares and would rather not deal with a tax form headache as there is nothing I'm trying to gain by the process, but it may be unavoidable! Thanks again for you kind responses.


----------

