The Strategy of Gifts of Appreciated Stocks

The Episcopal Community Foundation of Middle and North Georgia raises money in the name of Jesus Christ to benefit the poor and the oppressed. Such acts of generosity are both informed by the life of Jesus of Nazareth and formed by faith through Word and Sacrament. Being close to God means siding with and supporting those in need. The Episcopal Community Foundation allows all Episcopal communicants within the Diocese of Atlanta to pool their charitable resources to create the greatest positive impact on those with whom Christ himself identified - the poor and the oppressed. This article is written to ask the members of our church to give generously and give wisely.

Growing up in a small, poor town in Mississippi, I often heard people making reference in a pejorative way to the “Guv-mint.”  But as I surprisingly discovered later in life, Congress has, to its credit, enacted laws that mutually benefit nonprofit organizations and the donors who support them.

A case in point relates to donating gifts of appreciated stock to a charity one wishes to financially support.

As an example, if a prospective donor desires to give $10,000 to support an organization that’s designated by the IRS as a 501(c)(3) nonprofit, then the person could give $10,000 in cash (or make a credit card donation, or write a check) for which the donor would receive a charitable tax deduction. But let’s say this same prospective donor not only has the cash to give but also has access to $10,000 in appreciated stock. Now, what is the preferable way to give?

The tax-wise answer — one that allows donors to give more charitable support for less cost — is to make a $10,000 gift of appreciated stock to the charity.

How does someone with charitable intent do this?

The way NOT to do this is to sell the $10,000-worth of stock and then give it to the charity. Why? Because selling the stock creates a taxable event which would result in the owner’s having to pay a capital gains tax on the stock’s appreciated value. (Let’s say the owner bought $5,000-worth of the stock back when, and over time the value of the stock increased to $10,000. If the owner were to sell the $10,000-worth of stock, then $5,000 of the increased value is susceptible to being hit with a capital gains tax. And after the tax is levied, the owner then has less money to give the charity.)

What’s the best way to donate to a charity the $10,000 in appreciated stock? It’s easy. The donor should call one’s financial broker and direct the broker to gift $10,000 to the charity. (The charity should have an established account within which brokers, upon direction, can deposit the stock.) ECF has a very simple form to help you get all the right information to your broker to support people experiencing poverty and oppression as well as your parish!

What is the donor’s tax implication then? Well, the donor is able to receive a tax deduction for the donation, AND the donor does not have to pay a capital gains tax on the $5,000-worth of appreciation, which results in the charity receiving the entire $10,000, and the donor giving more money, in this case $10,000, after having only spent $5,000 that was invested, back then, in the stock. So, the end result is:

  • The charity receives the full $10,000
  • The donor receives a tax deduction for the contribution, and
  • The donor also does not have to pay a tax on the capital appreciation of the stock.

It’s a win-win situation for the charity and for the donor!

Robert B. Townes IV (he/him) serves as an At-Large Member of the ECF Board of Directors and a communicant of St. Bede’s Episcopal Church in Atlanta. He is married to the Rev. Lynnsay Buehler. Rob is the Executive Vice President of Sinclair, Townes & Company, a fundraising consulting firm in Atlanta. Rob has over 35 years of experience in nonprofit service and has provided annual, capital, and legacy giving counsel for numerous philanthropic organizations, including over 50 churches and church-based ministries. Learn more about the ECF Board of Directors.

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