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Securities

Donating long-term appreciated securities — rather than selling the assets and then donating the cash proceeds — is one of the easiest ways for donors to increase the amount of funds available to them for charitable giving. 

Long-term appreciated securities — for example, stocks, bonds or mutual funds that have realized significant appreciation over at least one year— is also one of the most tax-efficient ways to give.  You can avoid long term capital gains, and these gifts can be deducted at full market value, up to 30% of your adjusted gross income, with the ability to carry forward amounts exceeding your allowance for up to five years. 

In the end, these tax advantages for individuals have the effect of increasing your charitable dollars and your impact on the community.  The below table illustrates this win-win situation for both individuals and the community1:

 

Donate Stock Directly to LVCF

Sell Stock and Donate Cash Proceeds to LVCF
Cost of securities $20,000 $20,000
Current fair market value $50,000 $50,000
Long-term capital gains $30,000 $30,000
Capital gains and Medicare surtax paid2 $0 $7,140
Charitable Contribution/Charitable Deduction3 $50,000 $42,860
Value of Charitable Deduction Less Capital Gain Taxes Paid2 $19,800 $9,833

 

The donation of appreciated securities to a charitable fund held at LVCF offers other advantages, too.  A single gift (i.e. one transfer of securities) to an LVCF charitable fund can be converted to cash by LVCF and then granted to many other public charities, including those that would not have been able to accept the initial gift of securities.  By contrast, gifting securities directly to individual charities requires working separately with each of those charities, which assumes the charities would accept a gift of securities and which may take additional time and incur additional fees.  

Information about donating appreciated securities is available from the Community Foundation by contacting Erika Riddle Petrozelli, Director of Donor Services, at 610-351-5353 or erika@lvcfoundation.org.  Gifts of publicly traded stock can be accepted within days.  Gifts of mutual fund shares can take up to four to six weeks to complete.

 

1 This is a hypothetical example for illustrative purposes only. State and local taxes, the federal alternative minimum-tax and limitations to itemized deductions applicable to taxpayers in higher-income brackets are not taken into account. Please consult your tax advisor regarding your specific legal and tax situation. Information herein is not legal or tax advice.

2 Assumes all realized gains are subject to the maximum federal long-term capital gain tax rate of 20% and the Medicare surtax of 3.8%. Does not take into account state or local taxes, if any.  Assumes donor is in the 39.6% federal income tax bracket.