As the year-end approaches, many
individuals are making decisions on final charitable contributions. In recent
years, the donation of appreciated securities has become a more popular option
for donors. Gifting long-term appreciated securities from taxable accounts held
more than one year, rather than selling the securities and then donating the
cash proceeds, provides tax incentives to the donor and more funds for
charitable giving.
Long-term appreciated securities with
unrealized gain, such as stocks, bonds, and mutual funds, can be donated to
qualified charities approved by the Internal Revenue Service. A tax deduction
is available for the full fair market value, up to 30 percent of the donor’s
adjusted gross income. Capital gains taxes from selling the securities do not
apply nor does the charity have to pay capital gains taxes when the securities
are sold.
If the donation is greater than 30
percent of the donor’s adjusted gross income, the donor may be able to carry
forward excess amounts for up to five years. This deduction is reflected on
Schedule A of Form 1040 as an itemized deduction.
Crucial
Timing
If a donation of appreciated
securities is made near the end of the year, certain delivery rules in timing
the donation apply. This is important to keep in mind so that the donation can
be included within the tax year desired.
If a properly endorsed stock
certificate is unconditionally delivered or mailed to the charity, the donation
is considered completed on the date of delivery or mailing.
If the stock certificate is
processed through a bank, broker, or its corporation, the donation is not complete
until the stock is transferred to the charity on the corporation’s books. This
may take several weeks -- which is why delivery and timing can be so critical
in this process. It’s wise to check on the timing of processing a transfer to
make certain that the deduction will be available for use in the year
desired.
This issue also applies to any
mutual funds a donor may wish to contribute to a charitable organization. Therefore,
if the donation involves mutual funds, contact the fund company to ensure that
the transfer to the charitable organization can be completed by the end of the
year.
The impact on a donor’s tax return
may be substantial, so it’s always beneficial for a donor to consult with a tax
adviser in the final stages of planning sizeable charitable contributions.
If interested in donating to the
CCIM Foundation, go to www.ccimef.org for more
information.
Mary Stark-Hood, JD, CFP, is president
of the Hood Group, Inc., which provides consulting services to business
organizations and foundations. She serves as a consultant to the CCIM
Foundation. Contact her at maryshood@comcast.net.