Planned Giving Guide: Giving Stocks

Why giving stocks to COTS make sense?

An annual gift of appreciated stock is a sensible and cost effective way to support COTS. By giving appreciated stocks, bonds or securities, you can avoid paying capital gains tax on the appreciation, receive a tax deduction on the full value of the gift, and support COTS at a lower cost. That’s why many individuals prefer to contribute stock rather than writing a check. Here’s how it works:

John and Mary Jones usually make an annual gift to COTS of $1000. They would like to increase their gift and want to do so in the most economical manner. John and Mary review their assets and find they have 150 shares of XYZ stock they purchased five years ago for $600. The shares are now worth $1500. John and Mary review the following options and decide to give COTS their XYZ shares. They are able to increase their gift by 50% for little additional after-tax cost.

How much is deductible?

In most cases, the deduction allowed for non-cash contributions to charity is equal to the current fair market value of the securities given. The deductible amount is equal to the price you paid plus any appreciation. You can use the amount of the “paper profit” as a tax deduction, even though it has never been taxed. This can dramatically reduce the cost of making a gift to COTS and help increase the amount you can afford to give. You also avoid paying capital gains tax on the increased value of the stock in most cases.

To deduct gifts of appreciated stocks, bonds or securities at their current value, you must have owned them for at least a year and a day. The gift is deductible up to 30% of your adjusted gross income in the year of the gift. Any excess may be deducted over as many as five succeeding tax years. The transfer to COTS must occur before December 31 in order to be considered for the current tax year.

What about stocks that have decreased in value?

It’s usually best to sell the assets and give COTS the cash. This way, you create a capital loss for income tax purposes and you are also able to deduct the amount of your charitable gift.

What would COTS do with my gift of stock?

When COTS receives shares of stock, our Board of Directors has the option of selling the shares at current prices or holding on to the stock in order to receive dividend income or to sell it when the price goes up. The COTS Board works with a qualified financial advisor to make the most of every such gift.

I want to give COTS some stock. How do I proceed?

Talk to your financial advisor about how much you want to give and the timing of your gift. Your advisor can help you determine what stocks are best and make the transfer for you. Make sure your advisor has the following information:

It’s also important that your broker contact COTS to make sure we know about your transfer. This is important because your name will not be included in the wire transfer and COTS needs to send you a tax receipt for your records!

If you hold the actual stock certificate, mail the unendorsed certificate to COTS via registered mail, or drop it off at our office in Burlington. Mail a signed stock power form to COTS in a separate envelope (COTS has forms on file if you need one). These two documents must be in separate envelopes. Your gift is complete on the date of postmark of the second envelope. Finally, it is also very important that you receive and retain the confirmation of your transfer as proof of your tax deduction claim.

For more information on planned giving click here.