Gifting Securities to Earth Economics
Gifts may be made with many types of property, not just by writing a check. A gift of appreciated stock or mutual funds can be one of the most advantageous ways of giving.
Often, there is a greater tax advantage to making non-cash gifts. Many supporters have found that they achieve substantial savings by giving appreciated securities stocks or bonds that have grown in value since they were originally purchased). If you have held the securities for more than one year, you can avoid capital gains tax and receive a tax deduction for the full market value of the appreciated security on the date of the gift.
Example: John owns textile company stock originally bought for $1,500. The stock has appreciated and it is now worth $5,000. Because he supports Earth Economics' mission, John would like to make a $5,000. donation to the organization. The table below shows the differences in the "cost of giving" when his contribution is made with either the cash proceeds from the sale of the stock, an outright cash donation, or gifting of the stock itself.
The lowest "cost of giving" is the gifting of the stock itself to Earth Economics because John receives a deduction for the full current value of the stock and avoids tax on the capital gain, and he saves money on income tax because his AGI has been reduced by $5,000. Earth Economics can sell the shares and not pay taxes on the gain because it is a charitable organization.
| |
1) Sell stock
& donate cash |
2) Donate cash |
3) Donate appreciated stock |
| Gift Deduction |
$5,000 |
$5,000 |
$5,000 |
Income tax savings
($5,000 X 35%) |
$1,750 |
$1,750 |
$1,750 |
| Capital Gains Tax |
$700 payable |
--- |
$700 saved |
| Cost of Gift |
$3,950 |
$3,250 |
$2,550 |
| Cost per Dollar |
$ .79 |
$ .65 |
$ .51 |
Notes: We assume a 35% federal and state income tax and 20% federal capital gains tax.
If you are selling depreciated stock, you will gain more tax benefits by first selling the stock and then donating the proceeds.
Securities must be received by Earth Economics in the calendar year for which you intend to take the tax deduction (in other words, by December 31st.) It is best to allow at least a month for the transfer. The value of a gift of readily marketable stock is the mean between the high and the low share price on the day the stock is received into an account at Earth Economics. A donor's instructions to a broker to transfer stock are not sufficient to complete the gift. For Depository Trust Company (DTC) transfers, the date of gift is the date that DTC actually transfers your stock to an Earth Economics account.
A donation is definitely a "win-win proposition" for you!
Contact Earth Economics about making a charitable contribution! |
