If you are thinking about making a donation to Children Incorporated, a gift of stock may be more tax-smart than a cash gift. As stocks grow in value, they may appreciate substantially beyond the original investment. When stocks are sold, any growth above the original cost is considered a capital gain, and is subject to a capital gains tax of up to twenty percent or more – fifteen percent at the federal rate, plus five percent or more at the state rate.
By gifting appreciated securities that have been held at least one year and one day to Children Incorporated, you can avoid the capital gains tax and receive an income tax deduction for the fair market value of the stock at the time of the gift.
Mrs. Smith owns a stock with a current value of $10,000. She originally paid $2,000 for the stock (its “cost basis”). This means that when she sells the stock, she may pay a twenty percent tax on its appreciation ($8,000 in appreciation x 20 percent tax rate = $1,600). By gifting the stock to Children Incorporated rather than donating cash, she will not only receive an income tax deduction for the fair market value of the stock on the day of the gift, but she will also avoid the $1,600 in taxes.
- Stock – $10,000
- Cost basis – $2,000
- Appreciation – $8,000
- Capital gains tax avoided by making gift – $1,600
- Charitable tax deduction – $10,000
How to Make the Transfer
To transfer shares of publicly-traded stock to Children Incorporated, call your broker or financial advisor and instruct them to transfer the stock to Children Incorporated’s account. We can provide them with the information they will need to complete the transaction. To ensure proper handling of your gift, please call us at 1-800-538-5381 to notify us of the pending stock transfer.
Websites that may be helpful in understanding stock donations and other forms of charitable and planned giving: