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World Relief Planned Giving - Tim Maurer

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Gifts of Stock: A Wise Move?

The tax benefits of donating appreciated stock are two-fold, including deducting the amount of the charitable donation and escaping the unrealized gains on the donated stock. That’s because the deduction is equal to the asset’s current fair market value. This double benefit makes donations of appreciated stock a particularly attractive move for donors.

Donating stock that has appreciated in value to charity is an effective and tax-efficient way to support causes like World Relief. But it’s important to understand how the process works. Let’s look at an example of two donors whose stock is identical in value:

  • Donor A purchased stock for $100, and it has grown to be worth $110. He donates the stock directly to World Relief.
  • Donor B purchased stock for $100, and it also is now worth $110. He sells the stock and then donates the money to World Relief.

Are these donations equivalent? No.

Donor A can claim a charitable donation for $110. Also, World Relief can sell the stock for $110 and end up with the full $110.

However, Donor B’s stock sale triggers capital gains tax. His stock investment has a capital gain of $10; if his capital gain tax rate is 30%, that tax reduces the value of his asset to $107.

Red Flags: When Donating Stock is a Bad Move

There are two cases where donating stock is not advantageous to the donor (or the charity).

First, if the stock has been held for less than a year, donating it may not be a good idea. The charitable deduction for such a donation is limited to the stock’s cost basis (and not what it’s worth now).

Second, donating stock that has not appreciated in value can be problematic for the donor. For such stock, you would be better off selling the asset and giving the proceeds to charity, while also claiming the capital loss.

Let’s Discuss YOUR Charitable Priorities

World Relief Planned Giving Advisor Tim Maurer is a Certified Financial Planner who speaks frequently on the topic of family legacies and money management on Baltimore television stations and in national magazines. Tim shares your passion for international development, and for achieving your financial goals. If you have any questions about your planned giving options, please contact Tim.

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