Donating Private Company Shares to a Canadian Charity
For Canadian business owners and entrepreneurs whose largest asset is private company shares, donating those shares to charity is a recognised planning tool — but it's more complex than donating cash or listed securities, and the tax treatment is less favourable than for public securities. Specialized advice is essential.
Why private shares are different
Publicly-listed securities (TSX, NYSE-listed stocks, ETFs, mutual funds) enjoy a special rule when donated to charity — the capital gain on the appreciation is eliminated entirely. Donating $100,000 of public stock that cost $20,000 generates a $100,000 charitable receipt with zero capital gains tax on the $80,000 appreciation.
Private company shares (Canadian-controlled private corporation shares, holdco shares, family business shares) do NOT enjoy this elimination. Donation triggers normal capital gains realization. The donation credit typically offsets the tax, but the math is different from public securities.
There is a further wrinkle unique to gifts of your own private company shares. Under the Income Tax Act's "non-qualifying security" rules, a gift of shares in a corporation you do not deal with at arm's length is generally treated as not having been made — for donation-receipt purposes — until the charity disposes of the shares (typically within 60 months) or the shares otherwise cease to be a non-qualifying security, unless the gift qualifies as an "excepted gift." In broad terms, that generally means the recipient is not a private foundation and the donor deals at arm's length with it and its officials. This timing rule is a large part of why the immediate-redemption structures described below are so common, and it is one reason specialized tax advice is essential before donating private shares.[5]
Valuation challenges
Public securities have clear market prices. Private shares don't. Donation requires:
- Independent valuation by Chartered Business Valuator
- Documentation supporting the value (financial statements, market data, comparable transactions)
- Potential CRA review of the valuation
Valuations cost $3,000-$25,000+. Disputes over private share valuations are common in charitable donation contexts; the CRA scrutinises substantial private share donations.
Charity acceptance challenges
Most Canadian charities don't have the infrastructure or risk appetite to hold private company shares:
- No public market for the shares
- Potential ongoing involvement in business operations
- Valuation difficulties for annual financial statements
- Risk of share value decline
Practical approaches:
Charity-immediate-redemption. Donor donates shares to charity; company immediately redeems the shares for cash. Charity gets cash; donor gets charitable receipt for the share value.
Charity holds briefly then sells. Donor donates; charity sells to a third party (the donor, family, or external buyer) for cash.
Charity holds long-term. Rare; only for charities with specific capacity for this asset class.
Lifetime Capital Gains Exemption coordination
For qualifying small business corporation shares, the Lifetime Capital Gains Exemption provides substantial capital gains exclusion — $1.25 million for dispositions in 2025, indexed annually ($1,275,000 for 2026).[4] Coordinating LCGE use with charitable donations requires specialized planning but can result in highly tax-efficient outcomes.
A common pattern — donate enough shares to charity to generate a charitable credit that, combined with LCGE, eliminates terminal-year tax on the deemed disposition. Specialized estate planning lawyers and tax accountants handle this work.
Bequest planning
For business owners whose succession plan involves charity:
- Will can direct executor to transfer specific shares to charity
- Or direct executor to sell shares (or arrange company redemption) and donate proceeds
- Or use named beneficiary on holdco insurance to fund charity
Each approach has different tax mechanics. The right structure depends on the specific corporate structure, succession plan, and family/charity objectives.
When this strategy fits
- Business owner with substantial value in private company shares
- Charity aligned with donor's interests willing to accept the donation
- Tax planning need (terminal RRSP/RRIF inclusion, deemed disposition on other assets)
- Succession transition where charity involvement makes sense
- Family situation where some shares are being directed away from family heirs
When other strategies fit better
- Smaller estates where complexity isn't justified
- Owners without substantial private company appreciation
- Charities unwilling to accept the donation structure
- Family situations where shares should go entirely to family
What we focus on at It's Simple Will
The will questionnaire supports asset-specific bequests but private company share donation typically requires specialized planning beyond what a DIY will tool can provide. Engage planned-giving counsel and a tax accountant familiar with this work.
Related guides
Citations & sources
- [1]Canada Revenue Agency — Gifts of property — Canada Revenue Agency
- [2]Canadian Institute of Chartered Business Valuators — CICBV
- [3]Income Tax Act, RSC 1985, c 1 (5th Supp), s 70(5) — Deemed disposition on death — Justice Laws Website, Government of Canada
- [4]Income Tax Act, RSC 1985, c 1 (5th Supp), s 110.6 — Lifetime capital gains exemption — Justice Laws Website, Government of Canada
- [5]Gowling WLG — Tax considerations when donating shares in Canada (non-qualifying securities) — Gowling WLG
Frequently asked questions
Can I donate shares in my private company to charity?
Yes, but with specific considerations. The charity must be willing to accept and hold (or redeem) the shares — many charities are uncomfortable holding private shares because of valuation difficulty, lack of liquidity, and potential entanglement in business affairs. Some major charities have specific protocols for private share donations.
What is the tax treatment compared to public securities?
Significantly different. Donating publicly-listed securities eliminates the capital gains tax on the appreciation. Donating private company shares does NOT enjoy this elimination — the deemed disposition triggers normal capital gains realization, with the donation credit offsetting the tax. The receipt amount equals fair market value at donation.
How is fair market value determined for private shares?
Independent valuation, typically by a Chartered Business Valuator (CBV). The valuation considers the company's financial performance, comparable transactions, asset values, and growth prospects. The valuation is required for the charitable receipt and is often the subject of CRA review. Valuations cost $3,000-$25,000+ depending on complexity.
Can the charity simply hold the private shares?
Most charities prefer not to. Holding private shares creates ongoing administrative complexity, restricts the charity's liquidity, and potentially involves the charity in business operations. Common alternatives — donor donates shares to a holding charity (like a community foundation's affiliated structure) that immediately redeems them with the company; donor donates and company redeems; donor sells with the proceeds going to charity (less tax-efficient).
What about deemed dispositions at death?
Section 70(5) applies — private company shares are deemed disposed of at death at fair market value. Capital gain realized on terminal return. If shares pass to charity (via will), the donation credit applies to offset terminal tax. For business owners, this can be a significant tax planning lever.
Are there capital gains exemptions for private shares?
The Lifetime Capital Gains Exemption (LCGE) provides a substantial capital gains exclusion ($1.25 million for dispositions in 2025, indexed annually — $1,275,000 for 2026) on qualifying small business corporation shares. Coordinating LCGE use with charitable donation planning requires specialized tax advice but can be highly efficient for qualifying owner-managers.