Gifts of Appreciated Securities

September 19, 2008

Planned Giving, The Pilot

By Richard Ely

Many people say, “I would like to give my parish something to help them out financially, but is there some “trick” that will help me when it comes time to do my income taxes?” The answer is YES!

Nearly everyone knows that gifts to your parish are tax deductible for most people. But many people don’t know that they can help their own tax situations even more by making their gift with appreciated securities (like stocks or mutual funds). You can make a gift to your parish that in reality will give you much more tax advantage than a comparable gift of cash.

What are the tax benefits of giving appreciated securities?

Making a gift of appreciated securities can benefit you in two ways; you receive a charitable income tax deduction for the full fair market value of the securities, and at the same time avoid capital gains taxes on the appreciated securities.

Why is this such an advantage?

By donating the securities, you can either give a bigger gift to your parish for the same “cost” to yourself or you can decrease your cost of making the gift.

How do I calculate the gain?

You measure the gain by the difference between the cost basis (the amount you originally paid for the stock), and the fair market value of the stock.

Do I have to have held these securities for a certain period of time?

These rules cover long-term appreciated securities that you have owned for at least a year.

Are there any limits to the deduction?

For long-term appreciated securities, you can deduct up to 30% of your adjusted gross income. You can carry-forward any unused deduction for up to five years and use it on upcoming tax returns.

Are there any restrictions as to types of stock I can give?

Generally, publicly traded securities work best. These include stocks, bonds and mutual funds.

Do I need to get an appraisal to donate appreciated securities?

No. If there is a market for the securities, on a stock exchange, in an over-the-counter market, or otherwise, you do not need an appraisal.

How do I calculate the “fair market value” of the security for income tax deduction purposes?

You calculate the mean (average) between the highest and lowest quoted selling prices on the valuation date.

What is the valuation date?

The valuation date is generally the date that the security is actually transferred to your parish.

Can I combine giving appreciated securities with other types of gifts for even more advantage?

You certainly can. You can use appreciated securities to fund charitable gift annuities and charitable remainder trusts. This way you can increase your income too.

Should I give securities I own that have a loss?

No. It is better to sell the securities that have losses and use the loss to offset other gains you may have. You can then donate cash or other securities that have a gain.

Can you provide an example of why it’s better to give stock than to sell the stock and give cash?

As you can see the table below, both you and your parish are better off with a gift of appreciated stock. You make a larger gift to help your parish help animals, avoid significant capital gains tax and get a larger charitable income tax deduction.

Is there anything else to keep in mind?

You have to actually give the stock itself so you need to contact your parish or The Catholic Foundation to ask for current “delivery instructions” to make sure there is no confusion.

Are there any other “wrinkles” that can make this even more interesting?

One idea to consider: you don’t have to give stock in even amounts. Many people go through their investment portfolios and “prune” them — give fractional shares of stock or so called “odd lots.” That way they can make their own bookkeeping easier and pick up all the tax advantages too.

What if I need more information?

To request more information about making a gift of securities to your parish please call your pastor or Domenico Bettinelli, Jr., Manager of Gift Processing & Donor Relations, The Catholic Foundation of The Archdiocese of Boston, 66 Brooks Drive, Braintree, MA 02184, 617-779-3708 (direct) or domenico_bettinelli@rcab.org

This article appeared in a special “Stewardship” section of The Pilot on September 19, 2008

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