Diocese of Saskatoon

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Life Insurance Example

Donor purchases a life insurance policy and makes the Diocese of Saskatoon Catholic Foundation the owner and beneficiary of the policy.  The donor is entitled to a donation receipt for premiums paid to the insurance company after ownership has been transferred to the charity and for contributions made to the charity to cover the premiums.
Face Value of Policy $100,000
Premiums paid by Donor$35,000
Foundation issues a charitable donation receipt to donor to be used on donor’s annual income tax.$35,000
Tax Credit to Donor (assuming 44%)$15,400
After-tax cost of policy ($35,000 - $15,400)$19,600
The donor receives a $35,000 tax donation receipt which amounts to a $15,400 tax credit to reduce “tax owing”.   The cost of the $100,000 policy is actually only $19,600.