“Prosperity across generations”

The Power (and surprisingly low cost!) of Making Charitable Gifts with Appreciated Assets

Making charitable gifts with highly appreciated—or “low-basis”—securities rather than cash is an excellent charitable giving and tax planning technique. This works because the donor gives away their unrealized tax liability along with the shares. Since charities are tax-exempt, the liability does not come due when the charity sells the gifted shares. When gifting low-basis securities, the donor:

  1. gets a dollar-for-dollar tax deduction as they would for a cash gift
  2. eliminates a sizeable tax liability

Differences in tax rates and cost basis will affect this calculation. To determine the effective cost of charitable giving in your situation, enter the current value of your investment, your cost basis in this investment, and your marginal Federal and State tax rates into the calculator linked below.

Open Calculator

Example:

You are a Colorado resident with $100,000 of long-held stock with a cost basis of just $2,000. If you sell this stock outright, you will recognize $98,000 in long-term capital gains. These gains could be subject to a 20% long-term capital gain tax rate, a 3.8% Medicare surtax, and a 13.3% state income tax—a nearly $28,000 tax bill—leaving you with just over $72,000 cash after tax.

Consider instead generously gifting this same $100,000 of low-basis stock to your favorite qualified charity. The charity will be able to immediately sell the stock and utilize the full $100,000 value with no tax consequences. Gifting the shares eliminates the nearly $28,000 in long-term capital gains tax you would have owed when that stock was sold. Further, you gain a $100,000 tax deduction worth up to $41,600 (based on a top Federal tax rate of 37% and a Colorado State rate of 4.63%).

By using very low-basis stock rather than cash for your $100,000 charitable gift, your cost is just $30,500—the difference between the $72,100 in post-tax proceeds you’d have from an outright sale and your $41,600 tax credit from the donation.



Tillman Hartley is an independent, partner-owned wealth management firm with offices in Cherry Hills Village, Colorado, Asheville, North Carolina, Nashville, Tennessee, and Orlando, Florida. We serve the unique financial and planning needs of successful individuals and multigenerational families. The generosity of our client families has allowed us to amass extensive experience with charitable gifts and estate planning entities for the charitably inclined. If you currently have or are considering a private foundation, charitable remainder trust (CRT), or charitable lead annuity trust (CLT, CLAT) we would like to discuss how our management can add value. Similarly, consider contacting us before making a sizable or long-term charitable commitment or a gift with naming rights.


Privacy Policy | Disclaimer