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Giving Appreciated Shares

My wife was born on the 4th of July.  It’s a big day of celebrations and traditions that are important to my family.  I love our country and I love Uncle Sam, but one of my favorite things is helping clients find ways to keep him out of their wallets any more than he already is.

Are you charitably inclined?  Do you regularly financially support your house of worship or your favorite causes?  Do you also have investments in non-IRA accounts that have appreciated significantly?

Why not give your charity those appreciated investments?  Let’s say you were planning to give a non-profit $1,000.  You could write them a check: you’d get the tax deduction (maybe – current tax law has changed this slightly – conversation for another day) and the charity would get the funding they need.

Or you could give them $1,000 of stock or mutual fund shares.  Let’s say you paid $300 for those shares.  You’d still get the $1,000 potential tax deduction, the charity would sell the shares and have the cash they needed.  However, the $700 in gain that has yet to be taxed does not get taxed at all.  The non-profit pays no tax on capital gains and since you gave the shares away, you don’t either. 

If you then replace those shares with the $1,000 in cash you would have otherwise given to the charity, your portfolio is right where it was but it’s ready to send you a smaller tax impact when you need to sell those shares later – let’s say at retirement.

Of course, there are many specifics that make this kind of idea work or not work, so please give us a call or talk to your tax advisor to see if this would work in your case.

David Dugger

Written by David J. Dugger

David graduated from the University of Texas at Austin with his Bachelor’s and Master’s degree in Accounting. David spent four years with the accounting firm of PwC prior to joining the firm in 2000. David and his wife, Shannon, have a daughter and a son. David spends his free time enjoying travel, the outdoors and live music.