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Goal: Avoid capital gains tax on securities sale
Benefit: No capital gains tax and charitable deduction based on fair market value
The gift of an appreciated asset, often common stock or mutual fund shares, is a valuable way to make a contribution to a charitable organization and receive tax benefits based on the value of the asset(s).
Suppose Richard and Terri had 300 shares of XYZ Corporation that they purchased at $15 a share some years ago. The current value in today's market is $36 a share. If they sold the stock in the market, they would have a taxable, long-term capital gain on the difference between their cost and what they would receive from the sale ($36 minus $15 = $21 capital gain per share. 300 shares X $21.00 = $6,300 in capital gains).
Richard and Terri could sell the
stock, pay the tax on the capital
gain, and either keep or donate the
proceeds. If, however, instead of
selling the stock, they gave the 300
shares to charity, they would not
incur any capital gains and would
be able to deduct the current value
(300 shares X $36 = $10,800) on their
tax return as a charitable gift. By
their donating the stock, the charity
receives a larger gift than it would
receive if Richard and Terri first
sold the stock and then donated the
proceeds after deducting the capital
gain taxes. Also, Richard and Terri
receive a greater tax deduction by
giving the stock directly to the charity
and avoiding the capital gain tax.
While the gift of appreciated assets often is stock, other marketable assets (called tangible personal property) can be utilized as gifts with the possibility of tax benefits. These are assets such as real estate, antiques, coin or stamp collections, and art. However, these are reviewed on a case-by-case basis. For more information about gifts of any appreciated assets, please contact us so we can respond to your specific needs.
Return to Wills and Bequests or to Charitable Lead Trust story.