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Gifts of Appreciated Securities
A $5,000 cash gift and a gift of $5,000 in appreciated securities both generate the same charitable deduction. But if you use publicly-traded stocks or bonds to make your gift, you will receive an additional tax benefit: the IRS allows you to make your transfer to The College of New Jersey Foundation without recognizing capital gains on the appreciation. You can thus leverage a larger donation than you could make with cash -- and receive a larger tax deduction -- by "buying low and giving high."
Your gift of securities is valued as of the day it reaches our account if your broker transfers them electronically, or the postmark date if you mail the shares. Your gift value is the average of the high and the low prices for the securities on that date.
This gift is for you if...
- You're holding stocks, bonds, or mutual fund shares that have risen in value.
- You want to maximize your deduction but not affect your liquidity.
- You want to make an outright gift to us, or a gift that will first return lifetime payments to you.
The IRS still offers you a notable tax break for charitable gifts: you may deduct the full, fair market value of appreciated assets that you give us, and also avoid capital gains liability on the transfer.
This means that you can leverage a larger donation if you use an appreciated asset to make your gift instead of cash.
Stocks and Bonds
The most common appreciated asset, and the easiest to donate, is marketable stocks and bonds. Here are some details about these gifts:
How will your gift of stock be valued?
It's the average of the high and low prices for the stock on the date of the transfer to us. If the high bid was $80 and the low was $70 on the day you made your gift, your deduction will be $75 per share.
IMPORTANT! Don't sell the stock first! Even though you give us the proceeds as a gift, the IRS will impose capital gains tax on your sale, wiping out the benefits of this arrangement.
What if your stock has declined in value?
The fair-market deduction rule works against you: if you bought stock for $50,000 and it's now worth $30,000, your charitable deduction will be limited to $30,000. You won't earn a capital loss by making the transfer to us, either.
It is better to sell depreciated stock, claim the resulting tax loss as one deduction, then make a deductible cash gift to TCNJ with the proceeds.
When is your gift complete?
If your stock is held by your broker, it's the date the shares reach our account. If you hold the stock yourself and mail it to us, it's the postmark date on the envelope.
How should you transfer securities to us?
If your broker holds the shares, he or she should contact Jan Kubik (609-771-3285) for transfer instructions.
If you hold the shares yourself, mail them unendorsed, and in a separate envelope mail a stock power signed in blank for each stock certificate to:
Office of Development and Alumni Affairs
PO Box 7718
Ewing , NJ
08628-0718
Can you deduct the full amount of your gift?
Yes, within this limitation: the IRS says that you can deduct gifts of appreciated assets up to 30 percent of your Adjusted Gross Income ("AGI" - the figure at the bottom of the first page of Form 1040).
Thus, if your AGI will be $100,000 this year, you will be able to deduct up to $30,000 in gifts of stock. A gift in excess of the 30 percent amount is not wasted, however, because the IRS allows you to carry forward excess deductions through the five tax years following the year of your gift.
Note that the IRS allows cash gifts to be deducted up to 50 percent of adjusted gross income. Therefore, the deduction for a large gift of appreciated assets could take longer to claim than the deduction for the same gift made in cash. But if the donated assets had a small cost basis, they could still be more tax-efficient to use than cash.
Example
You own stock with a fair market value of $100,000 that you purchased for $30,000.
If you contribute that stock to TCNJ you will claim a charitable income tax deduction for the full $100,000. In addition, you will not be liable for tax on the $70,000 capital gains upon transfer of the stock.
By donating appreciated stock instead of cash, you have delivered $100,000 to us and secured a tax deduction in the same amount, at a cost to you of only $30,000.
Please call The College of New Jersey Gift Planning Office at 609-771-3285, or e-mail jspencer@tcnj.edu for more information.
