Extending Capital-Gains Relief to Donations of Private-Company Shares and Real Estate

From: Vahan Kololian

To: Finance Minister - François-Philippe Champagne and parliamentarians from all parties

Date: October 9, 2026

Re: Extending Capital-Gains Relief to Donations of Private-Company Shares and Real Estate 

In 2006, the law was changed to eliminate capital gains tax on donations of publicly traded securities to charities. The capital-gains inclusion rate was reduced to zero, effectively making the capital gain on such a donation tax-free, and providing the donor a charitable donation deduction. 

Since that time, donations of publicly traded securities have become an important source of funding for the charitable sector. It is estimated that this favourable treatment has helped generate approximately $1 billion in additional charitable giving annually. 

This has been enormously meaningful to the charitable sector. It has enabled Canadians to make larger charitable gifts. 

However, this favourable treatment does not generally extend to donations of shares of private companies or other privately held assets. A donor who contributes appreciated private-company shares faces capital-gains taxation, creating a significant disincentive to making such a donation. As a result, donations of private-company shares almost never take place.

The primary advocate in 2006 for the change in donating marketable shares was philanthropist Donald K. Johnson. Last week he took up the mantle again to include private company shares and real estate in such giving where the donor would be exempt from capital gains tax and would also receive a charitable donation. 

The same problem exists with real estate. An owner may be willing to give a substantial portion of the value of an appreciated property to charity, but the potential capital-gains tax can make the transaction economically unattractive. 

This is a significant missed opportunity. Canada's non-profit sector is a major component of the Canadian economy, accounting for approximately 8.3 percent of GDP and supporting approximately 2.8 million jobs. The charitable and non-profit sector is a significant contributor to science, medical research, education, culture, and innovation. Minister Champagne, the purpose of this submission is to respectfully request that these provisions relating to donating private company shares and real estate be considered and included in your next budget.  

Extending the same basic tax principle that applies to publicly traded securities, in an appropriately structured manner, to private-company shares and real estate, could unlock a substantial new source of charitable funding. 

It is estimated that donations of private-company shares and real estate could generate an additional $200 million to $400 million annually for Canadian charities. In terms of an actual drain to the federal treasury, the amount would be in the order of $100 to $200 million, which is supportable, given the benefits that can be derived from such donations. 

The potential cost to government would be substantially less than the value of the additional charitable giving generated. Moreover, the fiscal cost should be viewed in the context of the broader economic and social benefits created by charitable organizations, including their contributions to research, health care, education, and other public priorities. 

One of the principal arguments against extending the favourable tax treatment to private-company shares and real estate is the difficulty of establishing their fair market value. This concern  can be addressed  in a simple and transparent way.

Rather than requiring a charity to declare, and the tax authorities accept, the value of an illiquid private asset at the time of donation, the value of the donation would be determined after the sale of the private company shares or a piece of real estate. The transaction would need to be at arm’s length. The owner would then have, for example, 30 days to donate all or a portion of the cash proceeds from that transaction to a registered charity. 

The amount donated within that 30- day period would receive the same capital-gains treatment that would have applied had the underlying asset itself been donated, in the same way the current regime deals with publicly listed shares. In other words, the tax benefit would be tied to an actual market transaction, rather than to a potentially subjective valuation of an illiquid asset.  

Indeed, the success of the publicly traded securities regime demonstrates that tax policy can be used effectively to encourage Canadians to direct capital toward charitable purposes. The same principle should now be considered for private companies and real estate. 

If Canadians are prepared to give a portion of the value of their businesses and real estate to charity, government policy should not unnecessarily discourage that generosity. 

A carefully designed realization-based regime could unlock hundreds of millions of dollars of additional charitable giving each year, while providing appropriate safeguards against valuation disputes, abuse and unintended tax consequences. The result would be more resources for Canadian charities, more investment in research and innovation, and greater capacity to address the social needs of Canadians – without requiring government to fund those initiatives directly. 

Vahan Kololian, a member of the Order of CanadaC.M, is the founder and chairman of The Mosaic Institute (2007 – 2025).  He is also the founder of TerraNova Partners LP. 

To send a comment or leave feedback, email us at blog@cdhowe.org. 

The views expressed here are those of the author. The C.D. Howe Institute does not take corporate positions on policy matters.