What Are Publicly Traded Securities?
Publicly traded securities are 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 to mutual fund shares as to shares of publicly traded securities. Gifts of mutual funds have the same tax benefits as gifts of individual securities.
Tax Benefits of Contributing Publicly Traded Securities
You can save income tax 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 provided 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% 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 gains in the securities. If you were to sell these securities yourself, you would owe capital gains tax on the difference between the sale price and the amount you paid for them.
Should I Give My Securities or Sell Them and Give the Proceeds?
If you have held your securities for more than one year and they have appreciated in value, you should give them directly to Robin Hood. This way, you will avoid paying tax on any capital gains 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 gains – 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 gains. 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 the securities and take the capital loss. You can then donate the proceeds of your sale to Robin Hood and use the capital loss to offset future capital gains.
What Happens if I Give Securities That I Bought Less Than One Year Ago?
The charitable deduction available for property you have owned for 12 months or less, so-called "short-term capital gains" 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 50% of your adjusted gross income rather than 30%.
Is It Easy to Make a Gift of Publicly Traded Securities?
Yes. Whether you plan to give one share or one thousand shares, it is easy to give your publicly-traded securities.
Give Securities and Receive Payments for Life
Another option for giving securities is through a life income plan. Giving securities through a life income plan such as a charitable gift annuity, charitable remainder trust or pooled income fund allows you to provide income for yourself or others you care about – and then provide support to Robin Hood! Here's how it works:
- You transfer securities to the life income plan.
- 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 gains from your gift of securities.
- During the term of the life income plan, you receive payments from the plan each year, typically for life.
- When the life income plan ends, its remaining principal goes to support Robin Hood.
Using securities to fund a life income plan typically will reduce your income taxes, providing tax savings if you itemize, and reduce or eliminate your capital gains taxes.
