Deciding What to Give

Cash: a popular gift

Webster University commonly receives gifts in the form of cash, checks, and direct deposits. Cash gifts can be convenient for many people and are easily recorded through receipts and bank records. Remember that it is important to save all receipts for tax purposes.

Non-cash gifts: enjoy more savings

Many Webster University supporters choose to make their gifts in forms other than cash. Popular examples include:

  • Securities (stocks, bonds, mutual funds) 
  • Real estate
  • Retirement plans
  • Life insurance policies
  • Other items of value (jewelry, artwork, collections, antiques, automobiles, etc.)

 

After considering the properties you own, you may find giving something other than cash to be an appealing alternative. Giving non-cash property may enable you to make gifts while conserving cash for other uses and enjoying what may be greater tax savings than those provided by gifts of cash. See Interactive Example

When property is worth more

If you have non-cash property, such as stocks and mutual funds, that is worth more than you paid for it (appreciated) and has been held long-term (more than one year), you can generally enjoy greater tax savings from giving such property than from giving an equivalent amount of cash. That's because a gift of property that is worth more than it cost lets you bypass capital gain tax that could be due if you sold the asset. You are also entitled to a charitable deduction based on the property's current value, including any "paper profit."        

Example

  1. Jordan is in the 35% tax bracket and a 15% capital gains tax bracket and would like to make a $10,000 gift to Webster University.
  2. Jordan gives appreciated securities with a cost basis of $2,000 instead of cash. Webster University sells the securities, pays no capital gains tax, and receives $10,000, less expenses, from the sale.
  3. Jordan receives a charitable income tax deduction in the amount of $10,000 and pays no capital gains taxes on the sale of the securities, saving $1,200. The cost of the gift net of all tax savings has been reduced to $5,300 ($10,000 - $3,500 - $1,200), a savings of $1,200 over cash.

View Full Text Version

NOTE: This calculation is provided for educational purposes only. The type of assets transferred, the actual date of the gift, and other factors may have a material effect on the amount or use of your deduction. You are advised to seek the advice of your tax advisors before implementing a gift of this type.

Planning Tip: If you like all of the securities you own and cannot decide which to give, simply select the stock with the lowest cost basis and give it. Repurchase the stock at the time you make the gift with the cash you would have otherwise used to make the gift. This will increase the basis in your stock to 100% and save you capital gains taxes in the future should you sell the stock. This may also make it possible to benefit from a loss deduction should the stock decline in value before it is sold.

Giving property that has declined in value

If you have stock or other investment property that is worth less than it cost, you will normally save more in taxes by selling that property and giving the proceeds. You may then be able to claim a capital loss on your tax return. You can also deduct the cash proceeds you give as a charitable gift. The result can be to enjoy tax deductions that actually total more than the current value of the asset, while making a meaningful gift to the charitable organization.

© Copyright 2017 by Sharpe Group. All Rights Reserved.