11 Nov Appreciated Stock Donations
By Jason Shelnutt
As we approach the end of the year, many of us are beginning to evaluate our income, taxes, and gifts to charitable organizations. Our donations are the lifeblood of organizations such as Mission UpReach. I have been a supporter for years because I love Mission UpReach’s focus on building a Christ focused organization that helps the people of Honduras obtain self-supporting skills. In addition, the businesses Mission UpReach is developing will also help the organization itself to become more self-supporting as well.
One method of giving that you may not have considered is donating appreciated stock. Our stock market has done well in the last few years despite the pandemic shock of 2020. Some of you may be holding individual stocks that have substantially risen in value. Donating appreciated stock rather than selling the stock and donating cash allows you to deduct the full market value of the stock, and under current law you will not pay any tax on the inherent capital gain if you have held that stock for longer than a year.
As an example, if you purchased a stock for $1,000 over twelve months ago and the value of the stock has risen to $5,000, you have an unrealized long-term taxable gain of $4,000. Your tax on that gain, if you sold the stock before donating, may vary depending on your income level, but we will assume the tax rate would be twenty percent or $800, and the cost of the donation becomes $5,800. If instead, you transferred the appreciated stock to Mission UpReach they may then sell the stock for $5,000 and you avoid the $800 capital gains tax. You could then consider increasing the donation by the amount of the tax avoided. This strategy can also work with mutual funds if they have a longer-term investment strategy and the difference between your basis in the shares of the fund and current value is substantial.
If you have an interest in pursuing a stock donation, consult your representative at your brokerage to determine the exact process. Usually, they request a letter from you identifying the specific shares to be donated along with the information on the Mission UpReach account. Often this letter can be uploaded to their website securely. Mission UpReach can provide their account information to you. If you have purchased the stock on multiple dates, be sure to describe the specific date(s) of purchase for the shares to be donated in the letter to your broker and use the shares with the largest long-term capital gain. The process may take a few days, so begin the process with some time to spare.
Jason Shelnutt is a CPA that has been an accountant, consultant, and healthcare executive for the last 45 years. Aside from being a long-time supporter of Mission UpReach, he also serves on the Board of Directors for Independent Communities (a housing project specifically for individuals with significant disabilities) and Raintree Village Children’s Home. Jason and his wife Yvonne live in Roswell, Ga and have two adult daughters, Victoria and Melissa, and a grandson Castiel.