Welcome Tax & Ecology Seminar presented by The Georgian Bay - - PowerPoint PPT Presentation

Welcome

Tax & Ecology Seminar

presented by The Georgian Bay Land Trust

There are

significant

income and capital gains

tax benefits

available for

Georgian Bay land owners

who want to

help protect the bay’s wilderness.

Is your property part of the 20,000 acres of private Georgian Bay land that are

ecologically

significant?

If so……. There are things you should know

Conservation Context logging circa 1885 G

505 Million ft. cut in 1880 alone

First biological field station

• n the great lakes

GO HOME BAY 1902

1902 Conservation Begins

Eastern Georgian Bay & Watershed A Very Important Place

• Greatest biodiversity of reptile & amphibian

populations in Canada

• Greatest concentration of coastal habitats

in the Great Lakes

• World’s largest archipelago of

freshwater islands

Eastern Georgian Bay & Watershed A Very Important Place

• Coastal length of over 5,300 km

(mainland and islands)

• Highest densities of globally and nationally

rare species and vegetation communities in Ontario on the Shield

• UNESCO Biosphere Reserve Designation

Eastern Georgian Bay & Watershed A Very Important Place

• Home to more than 1,100

native plant and animal species.

It is a last refuge for 45 species at risk

• NCC MNR GBLT Eastern Georgian Bay

Project 2001-2005

• Great Lakes Terrestrial Conservation Blueprint
• GBLT NCC Natural Area Conservation Plan

Seminal Studies on Biodiversity

Protected Property Size

• 2 acres to 500 acres -

Sandy & Ingersoll 500 acres

Ways to Protect Habitat Conservation agreements Gifts of land Life-interest

Protecting Habitat is a GIFT Capital Gains Relief Income Tax Relief

Ecological Gifts Program

Conservation Easement You keep ownership

10 Acres

Non-Conservation Easement Portion You retain all building rights etc.

10 Acres

Conservation Easement 85-90% of value of outright gift

10 Acres

Conservation Easement Income Tax Credit Value 85-90% of outright gift

10 Acres

Income Tax Credit carry forward and use for 10 years

10 Acres

Conservation Easement Capital Gains Reduced by 85-90%

10 Acres

Donation of Vacant Land

5 acres

Donation of Vacant Land No Capital Gains

5 acres

Donation of Vacant Land Income tax credit on full value of land

5 acres

Income Tax Credit carry forward for 10 years

5 acres

Case For Conservation

Species Status S-Rank Blanding’s turtle (Emydoidea blandingii) Threatened S3,S4 Five-lined skink (Plestiodon fasciatus) Special Concern S3

Plant & Animal Inventory including species at risk

.

21,000 acres of developable Ecologically important lands Official Plans Do Not Protect Long-term Land trusts – a vessel for choice Conserve Open Spaces & Wilderness Places – forever

1902 Log Boom Go Home Bay

1902 Conservation Begins

Conservation Agreements All land owners can do A conservation agreement Retain full ownership Keep it wild forever

Gifts of Vacant Lots Capital gains relief Income tax relief Protection forever

Help keep it a special place!

Thank you!

Welcome

Tax & Ecology Seminar

presented by The Georgian Bay Land Trust

There are

significant

income and capital gains

tax benefits

available for

Georgian Bay land owners

who want to

help protect the bay’s wilderness.

Ecological Gift

• Gift of land (including a covenant or easement to which land is subject)
• Fair Market Value must be certified by Ministry of Environment
• Ministry of Environment must certify that it is ecologically sensitive

land, the conservation and protection of which is important to the preservation of Canada’s environmental heritage

• Tax credit based on the fair market value of the land (or easement)

donated;

• Un-realized capital gain on property gifted is not taxable;
• 10 year carry forward of donation credit available;
• Not subject to normal 75% income limitation

The Rules:

Example 1 – Sale vs. Donation

• Property has a certified fair market value of $1,000,000
• Original cost to purchase property was $100,000
• Owner of property has annual employment income of $150,000 which is expected to

continue for the next 10 years

• Principal residence exemption would not be available on the sale of the property
• Analysis prepared using 2017 tax rates

Sale of Property – Example # 1

Proceeds of Sale 1,000,000 Cost of Property (100,000) Capital Gain on Sale 900,000 Taxable Capital Gain (50% of gain) 450,000 Tax on Capital Gain (marginal rates) 237,942 Employment Income - 11 years @$150,000 1,650,000 Tax on Employment income at marginal rates (current year) 47,772 Tax on Employment income at marginal rates (future years) 477,720 Total Tax on Employment Income and Capital Gain 763,434 Net After Tax Cash Realized 1,886,566

Donation of Property – Example # 1

Fair Market Value of Property Donated 1,000,000 Cost of Property (100,000) Capital Gain That Would be Realized if Property was Sold 900,000 Taxable Capital Gain (0% of gain)

• Tax on Capital Gain (marginal rates)
• Employment Income - 11 years @ $150,000

1,650,000 Tax on Employment income at marginal rates (current year) 47,772 Tax on Employment income at marginal rates (future years) 477,720 Reduction in Tax due to Donation Credit (Current year) (45,674) Reduction in Tax due to Donation Credit (Future year) (443,491) Total Tax on Employment Income and Capital Gain 36,327 Net After Tax Cash Realized 1,613,673

Example 2 – Sale vs. Easement

• Property has a certified fair market value of $1,000,000
• Original cost to purchase property was $100,000
• Value of Conservation Agreement (Easement) determined to be $850,000
• Owner of property has annual employment income of $150,000 which is expected to continue

for the next 10 years

• Principal residence exemption would not be available on the sale of the property
• Analysis prepared using 2017 tax rates

Sale of Property – Example # 2

Proceeds of Sale 1,000,000 Cost of Property (100,000) Capital Gain on Sale 900,000 Taxable Capital Gain (50% of gain) 450,000 Tax on Capital Gain (marginal rates) 237,942 Employment Income - 11 years @$150,000 1,650,000 Tax on Employment income at marginal rates (current year) 47,772 Tax on Employment income at marginal rates (future years) 477,720 Total Tax on Employment Income and Capital Gain 763,434 Net After Tax Cash Realized 1,886,566

Easement on Property – Example # 2

Fair Market Value of Easement 850,000 Deemed Cost of Easement (85,000) Capital Gain on Easement 765,000 Taxable Capital Gain (0% of gain)

• Tax on Capital Gain (marginal rates)
• Employment Income - 11 Years @ $150,000

1,650,000 Tax on Employment income at marginal rates (current year) 47,772 Tax on Employment income at marginal rates (future years) 477,720 Reduction in Tax due to Donation Credit (Current year) (45,674) Reduction in Tax due to Donation Credit (Future years) (376,397) Total Tax on Employment Income and Capital Gain 103,421 Net After Tax Cash Realized 1,546,579

Example 3 – Partial Sale vs. Partial Easement

• Property has a certified fair market value of $1,000,000
• Land can be subdivided into two parcels. Parcel A has a value of $600,000. Parcel B has a value of $400,000
• Value of Easement on Parcel B determined to be $340,000
• Original cost to purchase property was $100,000
• Owner of property has annual employment income of $150,000 which is expected to continue for the next 10

years

• Principal residence exemption would not be available on the sale of the property
• Analysis prepared using 2017 tax rates

Partial Sale of Property – Example # 3

Proceeds of Sale 400,000 Cost of Property (40,000) Capital Gain on Sale 360,000 Taxable Capital Gain (50% of gain) 180,000 Tax on Capital Gain (marginal rates) 93,412 Employment Income - 11 years @ $150,000 1,650,000 Tax on Employment income at marginal rates (current year) 47,772 Tax on Employment income at marginal rates (future years) 477,720 Total Tax on Employment Income and Capital Gain 618,904 Net After Tax Cash Realized 1,431,096

Partial Easement on Property – Example # 3

Fair Market Value of Easement 340,000 Deemed Cost of Easement (34,000) Capital Gain on Easement 306,000 Taxable Capital Gain (0% of gain)

• Tax on Capital Gain (marginal rates)
• Employment Income - 11 Years @ $150,000

1,650,000 Tax on Employment income at marginal rates (current year) 47,772 Tax on Employment income at marginal rates (future years) 477,720 Reduction in Tax due to Donation Credit (Current year) (45,674) Reduction in Tax due to Donation Credit (Future years) (150,981) Total Tax on Employment Income and Capital Gain 328,837 Net After Tax Cash Realized 1,321,163

Summary – Tax Savings

Example # 1 - Sale vs. Donation Total Tax on Employment Income and Capital Gain if Sold 763,434 Total Tax on Employment Income and Capital Gain if Donated 36,327 Tax Savings Due to Donation 727,107 Example # 2 - Sale vs. Easement Total Tax on Employment Income and Capital Gain if Sold 763,434 Total Tax on Employment Income and Capital Gain if Donated 103,421 Tax Savings Due to Donation 660,013 Example # 3 - Partial Sale vs. Partial Easement Total Tax on Employment Income and Capital Gain if Sold 618,904 Total Tax on Employment Income and Capital Gain if Donated 328,837 Tax Savings Due to Donation 290,067

Summary – After Tax Cash Realized

Example # 1 - Sale vs. Donation Net After Tax Cash Realized if Sold 1,886,566 Net After Tax Cash Realized if Donated 1,613,673 Additional Cash Realized if Sold 272,893 Example # 2 - Sale vs. Easement Net After Tax Cash Realized if Sold 1,886,566 Net After Tax Cash Realized With Easement 1,546,579 Additional Cash Realized if Sold 339,987 Example # 3 - Partial Sale vs. Partial Easement Net After Tax Cash Realized if Partially Sold 1,431,096 Net After Tax Cash Realized With Partial Easement 1,321,163 Additional Cash Realized if Sold 109,933

Questions?