If he chooses to sell the stock, he will owe a capital-gain tax of $1,500 (15% of the $10,000 gain). This will leave him with $28,500 to contribute (ignoring any sales commission). He will save $9,975 in taxes in his tax bracket ($28,500 x 35%). At the end of the day, he only gets a gift receipt for $28,500 and the double wammy is that the cost of the gift will be $20,025 ($28,500 + $1,500 – $9,975). He gave less to the charity but spent more to do it.
But if he contributes the stock, his charitable deduction will be the full market value of $30,000, saving him $10,500 in income taxes ($30,000 x 35%). In addition, he avoids paying the $1,500 tax on the appreciation. The combined tax savings reduce the net cost of a direct gift of the stock to $18,000 ($30,000 – $10,500 – $1,500). Now, he will get the full deduction and is able to give it in a way that saves him an additional $1,500 over the straight cash gift.
Please note this example is for illustration purposes only. You should contact your tax advisor and discuss how gifts of appreciated assets would benefit you as well as the ministry you choose to give to. We are grateful that you would consider giving to our great work. Please contact us now to talk about options and ideas