Financial News & TipsAlan S. Moore / L’Observateur / January 20, 1999Everyone enjoys the feeling of importance that can be obtained from making a monetary gift to a charity, but not everyone knows that such feelings can be greatly enhanced with the gift of appreciated long-term securities. How so? you might ask. Well, when you gift appreciatedsecurities to a charity, you not only benefit the charity, you benefit yourself.
Published 12:00 am Wednesday, January 20, 1999
As a general rule, appreciated long-term securities donated to a charitable organization can be claimed as a charitable contribution (subject to limitations) for the full fair market value of the securities on the date of the contribution. When you gift appreciated securities, youavoid paying tax on the capital gain of any appreciated securities you would have sold in order to make a monetary gift. You also enjoy thebenefit of a larger charitable contribution.
Here’s how it works: Five years ago, John Smith bought some stock in XYZ company at a cost of $1,000. Since then, the shares have appreciated invalue to $10,000. By gifting that stock, John is able to give $10,000 tocharity (at a cost to him of only $1,000) and can typically take a $10,000 tax deduction (subject to a 30% of Adjusted Gross Income (AGI) limitation with the excess carried forward five years). Furthermore, John doesn’thave to pay any capital gains taxes on that sale.
Of course, most people don’t give to charity for their own financial benefit. But understanding the alternatives to cash donations may help youincrease or enhance the effectiveness of your gifts.
(Alan Moore is a financial advisor of Legg Mason Wood Walker, Inc., adiversified securities brokerage and financial services firm that is a member of the New York Stock Exchange, Inc. and SIPC.)
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