During 2014, Jake Baxter made one charitable donation of $100,000 to ACO, a

Canadian registered charity. His net income for the year is $120,000.
Required:
a) Calculate Jake’s maximum FEDERAL non-refundable tax credit for charitable
donations if he claims this donation in his 2014 tax return.
b) Assume that Jake has 500 shares of BCE that have an ACB of $35 and a FMV of $1,000. He is
thinking of donating these BCE shares to a charity instead of making the cash donation in a) above.
Outline the tax implications of such a strategy.

a) To calculate Jake's maximum FEDERAL non-refundable tax credit for charitable donations, you need to know the federal charitable donation tax credit rates. Here are the rates for 2014:

- 15% on the first $200 of donations
- 29% on the portion of donations over $200 but not exceeding $1,000
- 33% on the portion of donations over $1,000

In this case, Jake made a charitable donation of $100,000. Since his net income is $120,000, he falls into the highest tax bracket. To calculate the maximum federal non-refundable tax credit, follow these steps:

Step 1: Calculate the taxes owing without any charitable donation:
Taxes owing = Net income x Marginal tax rate
Taxes owing = $120,000 x 33%
Taxes owing = $39,600

Step 2: Calculate the tax credit on the eligible amount of the donation:
Tax credit = Charitable donation x Applicable tax credit rate
Tax credit = $100,000 x 33%
Tax credit = $33,000

The maximum federal non-refundable tax credit for charitable donations that Jake can claim in his 2014 tax return is $33,000.

b) If Jake donates his BCE shares with an ACB (Adjusted Cost Base) of $35 and a FMV (Fair Market Value) of $1,000 instead of making a cash donation, the tax implications can be as follows:

1. Capital Gains Tax: When Jake donates his BCE shares, it will be considered a deemed disposition, and he will be subject to capital gains tax on any accrued gains. The capital gain is calculated as the FMV minus the ACB of the shares.

In this case: Capital gain = FMV - ACB = $1,000 - $35 = $965

Jake will have to include this capital gain in his income for the year and pay tax on it at his marginal tax rate.

2. Charitable Donation Tax Credit: Jake will receive a tax credit for the fair market value of the donated shares. The tax credit rate will be the same as mentioned in part a) based on the total eligible amount of the donation.

3. Net Tax Benefit Calculation: Jake needs to compare the tax savings from the charitable donation tax credit to the tax payable on the capital gain. If the tax savings from the tax credit exceed the tax payable on the capital gain, then donating the shares may be a tax-efficient strategy.

It is important to note that tax laws and rates may vary based on the jurisdiction. It is always advisable to seek advice from a tax professional or consult the relevant tax authority for accurate and up-to-date information.