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Gifting Appreciated Securities Scenario

Susan wants to gift her shares of stock (which she has owned for more than one year) worth $10,000 to The Dayton Foundation. She has a basis of $1,000 in the stock to be gifted. Upon receipt, The Dayton Foundation immediately sells it for $10,000. Susan, therefore, is entitled to a $10,000 charitable deduction, subject to a limitation of 30 percent of her adjusted gross income. Any deduction she is unable to use in the year of the gift may be carried forward an additional five years. She pays no tax on the $9,000 gain she had in the stock.

If Susan had sold the stock first, she would pay capital gains tax on the $9,000, leaving $8,650 to gift to the Foundation. By gifting it to the Foundation first, the Foundation receives the full $10,000 and pays no tax on the transaction.

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