Broker Check

Donate stock and not cash

March 10, 2022
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Donate stock and not cash

If you have charitable intent and highly appreciated stock, you can easily donate stock to your favorite charity instead of cash. Many of us have highly appreciated stock in our portfolios that we could be donating to charities instead of selling and paying the capital gains.

 I recently donated some stock to a charity and targeted the donation to a particular member of the team. I spoke to him later and was surprised by the fact that no one had ever used highly appreciated stock as a charitable gift towards his charitable operation before.

There are many different charitable tools to use and some are very complicated. Such as CRTs and CLTs or something more simple like donor-advised funds and we can get into that discussion at a later date.

I’m talking about something as simple as contacting the charity and letting them know that you want to donate shares and push the shares out of your brokerage account to their account.

Typically, the charity will have a form to fill out for the charity and a form to fill out for the broker-dealer that’s holding the shares. Your broker-dealer is holding the shares with then send the stock to the charity’s broker-dealer who would then receive the shares and sell the shares to then use the cash.

Here are a few simple rules: 

  1. The stock needs to be held for at least one year and a day to get a deduction on the full market value of the stock.
  2. A donation of stock could be limited to 30% of your adjusted gross income, you can carry forward the excess tax deduction for five years
  3. each charity has a specific process and may have different forms, contact the individual charity
  4. it needs to be a properly organized charitable organization, i.e. kids don’t count!

 Here are some benefits: 

  1. You may feel like giving more
  2. you will get an upfront tax deduction for your gift
  3. you can get the charity the funds quickly
  4. reduce future capital gains
  5. can help you diversify out of a large highly appreciated position

it’s important to be in contact with the charity’s donor services before and after the donation. The charity will send you a letter at the end of the year thanking you for the donation and typically will list it.  The fair market value for the donation is the average between the high and the low stock selling prices on the delivery date. Please consult your accountant about your specific situation.

As always, if you have questions please contact us