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4 huge benefits of charitable gifts of stock


An ideal asset for charitable donations is appreciated, long-term, publicly traded stock. Before we list the benefits, let’s break down the terms.

“Appreciated” simply means increased in value.

“Long-term” means stock held for more than one year; stock held for 366 days. A long-term capital asset is generally taxed at a lower rate.

“Publicly traded stock” just means a publicly held company whose ownership is dispersed among the general public in many shares of stock which are freely traded on a stock exchange or in over the counter markets.

Let’s talk about the benefits of charitable gifts of appreciated, long-term, publicly traded stock.

Under federal tax law, charitable gifts of appreciated, long-term stock have a double benefit, as (1) the long-term capital gain is excluded from taxable income and (2) the charitable contribution deduction is the fair market value of the stock. I’ve got an example here.

Iowa law provides a third benefit – one can receive a state tax credit of 25% of the gift under the Endow Iowa Tax Credit ProgramDetails about Endow Iowa here.

Yet another benefit: the substantiation rules for gifts of donated securities are more relaxed than for gifts of other type of donated property. Gifts of publicly traded securities do not require an appraisal to document value. This is important, as non cash gifts of more than $5,000 generally require a qualified appraisal by a qualified appraiser, a quite complicated requirement I discuss here.

Note: the value of gifts of publicly traded securities are based on a simple calculation – the arithmetic mean of the highest and lowest selling prices on the date of the gift.