Articles of Interest

Discover the Hidden Potential in Your Stock

by Jeff Cory, CFP, ChFC,
Executive Director

If you are trying to decide on just the right charitable contributions to make to Shell Point, you are facing many options. There are many giving opportunities to choose from and all offer different income, gift and estate tax deductions.

Appreciated securities, such as stocks, bonds and mutual funds are usually the most popular investment vehicles and offer gift potential you may not be aware of.

Giving securities is convenient, especially for people who don’t want to dip into their current cash flow to make a gift.

DOUBLE BENEFIT

By making a gift of appreciated securities, you enjoy the double benefit of:

• Receiving a charitable income tax deduction for the fair market value of the property
  
• You avoid the capital gains tax on the property’s appreciation
  

If you sell a capital asset (i.e. stock, bond, tangible personal property, etc.), which has gone up in value since you purchased it, you must pay tax on the appreciation. The appreciation is the difference between the cost basis and fair market value.

Example

John and Adrienne Howard purchased $5,000 worth of stock in The Crispy Cracker Company in 1991. The stock is currently worth $22,000. Buy giving the stock to Shell Point, the Howards make a substantial gift while avoiding capital gains tax on the stock. This year, they can take an income tax deduction for the full fair market value of the stock up to 30% of their adjusted gross income. If their gift exceeds the deduction limitation, the excess can be carried forward into as many as five additional tax years.

BY MAKING A GIFT OF APPRECIATED SECURITIES, YOU:

• can deduct the full fair market value of the securities if held longer then twelve months
  
• avoid the capital gains tax when making the gift
  
• can deduct the fair market value of your gift up to 30% of your adjusted gross income
  
• may take advantage of the five-year carryover provision, which means if your contribution exceeds 30% of your adjusted gross income, you have five additional years to use the deduction
  
• make a sizeable contribution to Shell Point