By making a gift of publicly-traded securities to Plymouth State University you can potentially save income tax and capital gains tax.

A gift of publicly-traded securities could be right if one or more of the following situations apply to you.

  • You have owned publicly-traded securities for at least one year.
  • Some of these securities have increased in value since you bought them.
  • Some of these securities may provide you with little or no income.
  • You would like to make a gift to Plymouth State University.

How it works

  • You transfer shares of one or more publicly-traded securities, such as stock, bonds, and mutual funds, to PSU.
  • The two most common ways to give publicly-traded securities are to make an outright gift of your securities or to make a gift of your securities and receive payments for life.

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What are publicly-traded securities?
Publicly-traded securities include stocks, bonds, and other investment vehicles whose values are readily available from an established securities market. For example, stocks listed on the New York or NASDAQ stock exchanges are publicly-traded securities. 

Are mutual fund shares publicly-traded securities?
Although mutual funds are sold by individual mutual fund companies rather than on an exchange, the same charitable contribution rules apply. Gifts of mutual funds have the same tax benefits as gifts of individual securities.

Tax benefits of contributing publicly-traded securities
You can save both income and capital gains tax when you give shares of a publicly-traded security that you have owned for a year or more.

Income tax benefit
If you have held your securities for more than one year and you itemize, you may deduct from your taxable income the full fair market value of your shares as of the date of your donation, regardless of what you paid for them. Your deduction is limited to 30 percent of your adjusted gross income. You may, however, carry forward any unused portion of your deduction for up to five additional years.

Capital gains tax benefit
When you donate publicly-traded securities that have increased in value, and you have owned the securities for more than one year, you do not have to report any of your capital gain in the securities. If you were to sell these securities, you would owe capital gains tax on the difference between the sale price and the amount that you paid for them.

Should I give my securities or sell them and give the proceeds?
You should give your securities directly to Plymouth State University if you have held them for more than one year and they have appreciated in value. This way, you will avoid paying tax on any capital gain you have in your securities. If you sell your securities first and then give us the proceeds, you will have to pay capital gains tax on all of your capital gain, an unnecessary and potentially substantial cost to you.

What is the advantage of giving appreciated stock instead of cash?
When you make a charitable gift of cash, you get an income tax charitable deduction only. When you make a charitable gift of the same value with appreciated stock, you get the same income tax charitable deduction and you avoid capital gains tax on all of your capital gain. The more highly appreciated your security, the more capital gains tax you will avoid.

The chart below shows how making a gift with appreciated stock can save substantially more taxes than making the same size gift with cash.  

Cash Gift vs. Stock Gift

 

Cash Gift

Stock Gift

a.   Gift Value

$10,000 

$10,000 

b.   Income tax deduction

$10,000 

$10,000 

c.   Income tax saved (at 37% rate)*

$3,700 

$3,700 

 

d.   Purchase price

   -

$1,000 

e.   Increase in value (a - d)

   -

$9,000 

f.    Tax avoided on gain (at 20% rate)

   - 

$1,800 

 

g.   Total tax savings (c + f)*

$3,700 

$5,500 

*assumes donor itemized deductions

Should I make a gift of securities that have lost value?
No! If you sell securities that have lost value, you can net that capital loss against capital gains. Even if you cannot take a deduction for loss securities this year, there is a five-year carry forward. If you want to make a gift of loss securities, sell them and take the capital loss. You can then donate the proceeds of your sale to Plymouth State University and use the capital loss to offset future capital gain.  

What happens if I give securities that I bought less than one year ago?
The charitable deduction available for property that you have owned for 12 months or less (so-called "short-term capital gain" property) is limited to either its current full value or what you paid for it, whichever is less. For example, if you give stock worth $10,000 that you purchased nine months ago for $1,000, your charitable deduction will be $1,000, not $10,000.

When you give short term gain property, your deduction is limited to 60 percent of your adjusted gross income rather than the usual 30 percent. 

Is it easy to make a gift of publicly-traded securities?
Yes. Whether you plan to give one share or 1,000 shares, it is easy to give your publicly-traded securities to PSU.  

Give securities and receive payments for life
Another option for giving securities is through a life income plan. Life income plans such as charitable gift annuities, charitable remainder trusts, or pooled income funds allow you to provide income for yourself or others whom you care about and then provide support to PSU. Here’s how it works:

  1. You transfer securities to the life income plan.
  2. A gift of appreciated securities to a charitable gift annuity, charitable remainder trust, or pooled income fund will typically defer or in some cases completely avoid capital gain from your gift of securities.  
  3. During the term of the life income plan, you receive payments from the plan each year, typically for life.
  4. When the life income plan ends, its remaining principal goes to support PSU.

Using securities to fund a life income plan will typically reduce your income taxes, provide tax savings if you itemize, and reduce or eliminate your capital gains taxes. 

There are several life income plan options to choose from, and what is best for you will depend on a variety of factors. Please let us know if you would like to learn more.

Example

Scott Allen would like to make a $10,000 gift to Plymouth State University. While he could write a check for this amount, he will be able to save even more in taxes by giving stock worth $10,000 instead. After reviewing his plans with his investment advisor, he decides to give shares of Poptropica Corporation worth $10,000. He paid just $​1,000 for these shares when he bought them 20 years ago.

Benefits

  • Scott will earn an immediate income tax charitable deduction of $10,000, which will save him $3,700 (37 percent tax), provided he itemizes.
  • Scott may deduct up to 30 percent of his adjusted gross income in the year of his gift, with a five year carry-forward period.
  • He will avoid tax on $9,000 of capital gain, which will save him an additional $1,800 (20 percent tax).
  • He will gain the satisfaction of making a $10,000 gift to Plymouth State University.