Gifts of Appreciated Stock
These days donors are becoming more sophisticated in their giving and they are reaping tax benefits along with the charities! Consider a gift of appreciated stock. Appreciated stock is an excellent choice for funding charitable gifts because it can offer significant tax benefits for the donor without impacting cash flow. In fact, to offset a capital gain event during the tax year, many donors gift shares of stock or mutual funds to counter an anticipated capital gain tax.
Here’s an example of how a gift of stock can work: Bob and Jane have held a company’s stock for twenty years. It has appreciated greatly during that time, so much so that their cost basis is just 10 percent of the current value.
| Option X: Keeping the proceeds | Option Y: Making a charitable gift | ||
|---|---|---|---|
| Stock value | $50,000 | Stock value | $50,000 |
| Cost basis | $5,000 | Cost basis | Does not matter |
| Capital gain | $45,000 | Capital gain | Avoided |
| Capital gains tax (20%) | $9,000 | Capital gains tax | $0 |
| Brokerage fee (est.) | $500 | Brokerage fee (est.) | $0 |
| Value of sale | $40,500 | Value of gift and charitable deduction | $50,000 |
Typically, selling an appreciated stock triggers a tax on the realized gain—the difference between what you paid to purchase the stock and its current value. When you make a gift of appreciated stock directly to your favorite charity and the charity sells the stock, the taxable event and the fees are avoided because the charity is tax-exempt. Plus the donor can take a sizable charitable deduction on his/her taxes—a deduction that can be used to offset other taxable events. It’s truly a win-win situation for everyone (except for the IRS).
Contact the SAA office at (303) 444-0948 or if you are interested in making a gift of appreciated stock or mutual fund shares. Also contact your tax advisor for answers to questions about your particular situation.
Last updated February 19 2008