Giving Appreciated Stock

A win-win situation for both the donor and WorldVenture is when the donor makes a gift of appreciated stock or mutual funds. This is because the donor receives a charitable income tax deduction for the full fair market value of the stock or mutual fund. Long-term appreciated stock (or mutual funds) has a fair market value greater than its cost, since it was generally purchased more than 12 months earlier.

Appreciated Stock Case Study

Mr. and Mrs. Smith purchased 1,000 shares of stock for $25 per share that has appreciated to $100 per share over the past several years, for a total value of $100,000. When the Smiths decide to sell the stock, they find that the long-term capital gain is $75 ($100 minus $25) per share for a total of $75,000. The capital gains tax implication of such a sale is usually 20 percent federal capital gains tax, plus state capital gains tax (which could be 5 to 8 percent), payable on the gain of $75,000.

The Smiths instead decide to give the stock to WorldVenture. It is important to give the stock and not sell the stock first and give the proceeds. Selling the stock first and giving the proceeds would trigger the capital gains tax. Instead, the Smiths work with their broker and transfer the stock directly to charity. The result is that all capital gains tax is avoided.

The result of giving appreciated stock is:

WorldVenture has a gift as good as cash that will be used for God’s work. And the Smiths receive a charitable deduction equal to the fair market value of the stock, and they also avoid capital gains tax on 100 percent of the appreciation. An ideal “win-win” situation!