Stock and bond donations could skyrocket if capital gains tax axed.

"If this measure is passed, we expect donations of securities to charities to skyrocket," says JoAnne Ryan, TD Waterhouse's Philanthropy Advisor.

The new Conservative government's campaign pledge to eliminate capital gains on donations of traded securities to charities could provide a major boost to the charitable sector, according to a report from TD Economics. It is also arousing interest from the financial services industry.

Since 1997, according to the Jan. issue of Economics First, individuals and corporations donating publicly traded securities to public charities have received preferential capital gains tax treatment. They only had to include 25% of capital gains realized on the donation as income instead of the normal capital gains inclusion rate of 50%. This preferential tax treatment contributed to a 190% increase in the donations of listed shares to charities between 1997 and 2000. The elimination of the remaining 25%, if introduced in the spring 2006 budget, could lead to a further dramatic increase to such donations in the future.

Banks and other financial services are establishing a strong position to process charitable funds. TD Waterhouse recently launched the Private Giving Foundation, an independent registered charity to enable donors to set up permanent funds. In its first year, the Private Giving Foundation has exceeded $22 million, with over 80% comprised of donations of securities (stock, bonds etc).