Take
Stock in Education
| Foundation donors may have the
opportunity to enhance their giving capacity
by donating appreciated securities (individual
stocks or mutual fund shares) to the ESEF.
In addition, donors may receive a charitable
income tax deduction for the full market value
of the stock at the time of the gift in addition
to avoiding capital gains tax on its appreciation.
The combined benefit of |
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the income tax deduction and the capital gains avoidance
often reduces the actual “cost” of the
gift to almost 50 cents on the dollar.
Donors interested in this method of giving should
consult their tax or investment advisor. The following
two scenarios illustrate the potential savings:
Scenario #1 |
| John and Jane purchased 400 shares of
XYZ Corp in December 2002 for $5 per share
($2,000 total investment). XYZ Corp has rebounded
and is now selling for $20 per share. If John
and Jane sell today and donate cash, they
will be subject to capital gains taxes on
the amount of appreciation in the stock price: |
| Today’s Value of 400 Shares
of XYZ |
$8,000 |
| Original Value of 400 Shares of XYZ |
|
| Capital Appreciation |
$6,000 |
| Capital Gains Tax1
($6,000 X 15%) |
$900 |
| Net proceeds from sale ($8,000 -
$900) |
$7,100 |
Scenario #2 |
| If John and Jane donate the 400 shares of XYZ to the El Segundo Educational Foundation, they will avoid capital gains taxes and will also receive a charitable income tax deduction for the market value of the stock: |
| Today’s Value of 400 Shares
of XYZ |
$8,000 |
| Original Value of 400 Shares of XYZ |
|
| Capital Appreciation |
$6,000 |
| Capital Gains Tax
Avoided ($6,000 X 15%) |
$900 |
| Federal Income Tax
Deduction @ 33%2 |
$2,640 |
| Net Cost of the $8000 Gift ($900
+ $2,640) |
$4,460 |
Given these scenarios, the real question becomes,
who do you want to share your capital gains with,
the ESEF or the IRS? For additional information
on contributions of stock, please contact Wanda
Kaminski at info@elsegundofoundation.org.
This article is intended to
provide basic information regarding the transfer
of securities. Please consult with your personal
advisors regarding your particular situation.
1 Shares must be
held for more than one year. Otherwise the gain
is subject to ordinary income tax.
2 In some states, the donor
may also earn a state income tax deduction.
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