Divestor

In Canada, charities that are registered with the federal government enjoy certain benefits that other non-profit organizations do not. In exchange for being compliant with multiple government regulations, they have the ability of issuing tax receipts which equates to a refund of income taxes of 20.06% for the first $200 donated, and 43.7% for anything above that, using BC rates.

One of the items that a registered charity has to comply with is reporting to the Canada Revenue Agency so there is a degree of transparency where people can see where money is raised and spent within a charity. You can access this on the CRA Charities Listings site.

It is very important to know when an executive of a registered charity says that “We do not receive any government funding” that you check lines 4540 to 4560 on the return; if you see revenues there, the management is lying to the public. In addition, they are implicitly receiving government funding due to the value of the tax refund from charitable contributions. For example, if you were to donate $1,000 to a charity, your after-tax cost is actually $610.28. The federal and provincial government are essentially donating the other $389.72 in the form of an income tax refund.

Also there is the well-known issue of having a high percentage of money wasted on administration expenses. If line 5010 (Management and Administration component of total expenditures) and 5020 (Money spent to raise more money) are high compared to total expenditures in a charity, I would look at it as probable that they are not being efficiently run.

My advice would be to donate only to registered charities that you know at least one of the directors of, and your opinion of the director is positive. At least if they incompetently squander your money, you’ll be able to grill them in person and keep them accountable.

When you purchase or sell shares on a stock exchange, the current date is called the trade date. However, the actual transaction (the exchange of shares and cash) is processed in three business days, which is known as the settlement date. So for example, if you bought shares of something on Tuesday, December 8, the transaction is settled on Friday, December 11.

Computer networks and electronic processing of share transfers have made the three day requirement antiquated, but nobody has bothered to amend the rules.

One practical consequence of the three day settlement rule is determining which year a transaction was processed with respect to capital gains taxes. Take the practical example of selling shares for a $100 capital loss on December 30, 2009, with a settlement date of January 5, 2010. Do you report your $100 capital loss in your 2009 or 2010 tax filing?

The answer is 2010. Most financial publications out there correctly advise people that they have to dispose of their shares by December 24, 2009 in order to be able to book a capital loss (or gain) in the 2009 year. The trade will settle on December 31, 2009. A trade made on December 28, 2009 will settle on January 4, 2010. The reason is because both Christmas Day and Boxing Day are considered to be non-business days in Canada.

Most financial publications do not quote the source of the rules which governs this issue, mainly CRA Interpretation Bulletin IT-133. The rules using the settlement date was codified in this bulletin in 1973, which has survived to this very day.

As a final note, the USA uses a different system. For people filing with the IRS, they consider the trade date to be the year of disposition. The USA exchanges do not use Boxing Day as a non-business day, so trades performed on December 28, 2009 will settle on December 31, 2009.