Did you know that charitable gifts of marketable
securities (individual stocks or mutual fund shares)
provide two important benefits? The first is a
charitable income tax deduction for the market
value of the stock. The second is the avoidance
of capital gains taxes since the shares are donated
to charity.
As the market recovery continues, many of us will
experience capital gains on our investments. A
great way to both reduce your tax burden and lend
the "helping hand" to Sigma Nu is to
contribute appreciated stock to the Foundation.
The combined benefit of the income tax deduction
and the capital gains avoidance often reduces
the actual "cost" of the gift to almost
50 cents on the dollar.
Illustration with 2 Scenarios:
Scenario #1
John and Jane purchased 400 shares of XYZ Corp
in December 2002 for $5 per share ($2000 total
investment). XYZ Corp has rebounded and is now
selling for $20 per share. If they sell today,
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 |
$8000 |
| Original Value of 400 Shares of
XYZ |
-$2000 |
| Capital Appreciation |
$6000 |
| |
|
| Capital Gains Tax 1($6000
X 20%) |
$1200 |
| |
|
| Net proceeds from sale ($8000
- $1200) |
$6800 |
|
1Shares must be held for more than
one year. Otherwise the gain is subject to ordinary
income tax.
Scenario #2
If John and Jane donate the 400 shares of XYZ
to the Sigma Nu 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 |
$8000 |
| Original Value of 400 Shares of XYZ
|
-$2000 |
| Capital Appreciation |
$6000 |
| |
|
| Capital Gains Tax Avoided ($6000 X 20%) |
$1200 |
| Federal Income Tax Deduction @ 33%2 |
$2640 |
| |
|
| Net Cost of the $8000 Gift ($1200 + $2640) |
$4160 |
|
2
In some states, the donor may also earn a state
income tax deduction.
Given these scenarios, the real question may be,
who do you want to share your Capital Gains with,
Sigma Nu or the IRS? Securities in your brokerage
or custodial account may be easily transferred
electronically to the Foundation (Click
here to download the Instructions for
Contributions of Stock Form). For additional
information, please contact James Owens at 1-888-236-5323.
This is intended to provide basic information
regarding the transfer of securities. Please consult
with your personal advisors regarding your particular
situation.
|
