The Gift of Appreciated Stock
Oliver, a successful investor of many years standing, experienced singular success with 1,000 shares of XYZ purchased in 2000 at $10 and now worth $100 a share. If Oliver were to sell the stock his gain would be $90,000 ($100,000 less $10,000). Rather than pay taxes on the $90,000 (federal plus state and local), Oliver decides to donate the shares to Cato. Oliver will be entitled to an income tax deduction for the full $100,000 current value of the stock and will not have to pay capital gains tax.
A contribution of securities to the Cato Institute can provide you with significant tax benefits. If stock you own has appreciated in value and you have owned the stock for more than one year, you will be able to use the current value of the stock as your charitable deduction, up to 30 percent of your adjusted gross income (AGI). If a portion of your gift cannot immediately be deducted because of the AGI limitation, the “unused” portion may be carried forward and used for five years.
Bear in mind that, beyond this AGI limitation, there are other broad limitations on deductability—so make sure you consult your tax advisor.
In addition, you will not be required to pay capital gains tax on the appreciation that would have been realized if you had sold the stock.
A gift of stock is easily accomplished through an electronic transfer. Simply request that your broker transfer the shares directly to Cato’s account:
CHARLES SCHWAB & CO.
1845 K STREET, N.W. GROUND FLOOR
WASHINGTON, D.C. 20006
ACCOUNT NO. 2170-8366
DTC NO. 0164, CODE 40
Your broker should contact Brian Mullis at 202-789-5263 or firstname.lastname@example.org the transfer has taken place.