Intelligent Giving

By: J. Samuel Fitch, CFP® with Bridgeworth, LLC


I have always been impressed and inspired by how charitable people are in the South. There is no limit to the number of organizations that are truly making a difference in our communities.


If you are planning to make a relatively substantial contribution to a charity, such as a church or synagogue, university, hospital, or other qualified charitable organization, you should consider donating appreciated stock or mutual fund shares instead of cash. You can receive meaningful tax benefits from the donation and the organization will be excited to receive the gift.


As an example, assume Ben and Jerry each inherited shares of General Motors stock 20 years ago worth $25,000 with a $5,000 tax cost basis.


Ben decides to sell his stock so he can give cash to a local charity. This creates capital gains tax of $4,000 (assuming a 20% capital gains rate) so he gives the remaining $21,000 to the charity. Assuming he is in a 25% tax bracket for Federal and State, Ben realizes a tax savings of $5,250 as a charitable tax deduction.


Jerry, on the other hand, decides to donate his actual shares of General Motors to his alma mater. He receives the full benefit of the value of the stock at $25,000, does not pay any capital gains tax and realizes a tax savings of $6,250 since he is also in a 25% marginal tax bracket. Obviously, a much better result for both the university and Jerry.


The key facts to know are:

• You will be eligible to receive an income tax charitable deduction for the full market value of the shares at the time of the gift.

• If the security has been held for at least one year, you will avoid paying capital gains tax.

• The organization you are donating to must have an investment account that can accept the securities “in-kind”.

• The gift must be made by December 31st to qualify for the current tax year.

• The gift of appreciated shares is fully deductible up to 30% of your adjusted gross income (high income donors may be subject to a partial phase out).


This tax planning technique is derived from the general rule that the deduction for a donation of property to charity is equal to the fair market value of the donated property. Where the donated property has an unrealized long-term capital gain, the donor does not have to recognize the gain on the donated property. These rules allow for the "doubling up," so to speak, of tax benefits: a charitable deduction, plus avoiding tax on the appreciation in value of the donated property.


The tax aspects of charitable giving can be complex so please consult with your tax professional before making any gifts. However, executed properly, gifting appreciated shares is a great way to support the causes that are most important to you while also reducing your tax burden.


*Charitable Contributions of Stock, Roy Lewis, The Motley Fool


*Charitable Donations: The Basics of Giving, by Rande Spiegelman


This commentary is provided for information purposes only and does not pertain to any security product or service and is not an offer or solicitation of an offer to buy or sell any product or service. Any opinions expressed are based on our interpretation of the data available to us at the time of the original publication of the report. These opinions are subject to change at any time without notice. Bridgeworth, LLC does not undertake to advise you of any changes in the views expressed herein. Unless otherwise stated, all information and opinions contained in this publication were obtained from sources believed to be accurate and reliable as of the date published or indicated and may be superseded by subsequent market events or other reasons.


Risks include, but are not limited to, liquidity, credit quality, fluctuating prices and uncertainties of dividends, rates of return, and yield. Past performance does not guarantee future results. Investors should consult their Financial and/or Tax Advisor before making any investment decision.



BTN #1-405505.0715.