Giving Publicly Traded Stock To Charity,Fred
May 7th 2018
One of the best things about having highly appreciated publicly traded stock is that it is the most attractive way to make charitable gifts.
The Gotham Gal and I do this all of the time and I encourage others (founders, early employees, investors, angels, etc) to do it.
Here’s how it works:
Let’s say you have shares of Facebook that you got when you joined back in 2006.
Let’s say that your exercise price was $3/share and that is your cost basis.
Let’s say you want to make a $100,000 gift to a great cause that you are deeply involved with.
Instead of taking out your checkbook (who does that anymore?) and writing a $100,000 check, consider gifting some Facebook shares.
At $175/share, a $100,000 gift would be 571 shares.
So you ask the charity if you can gift shares. Almost every time I do that, the answer is yes. They give you a brokerage account that you can “DTC” the shares to.
And you instruct your brokerage firm to move the 571 shares to the charity’s brokerage account and you have made a $100,000 gift.
But, because you no longer have to pay the capital gains taxes on those shares when you sell them, and neither does the charity, you have a much more tax efficient gift.
I figure that a stock gift costs about 10-20% of the dollar value of the gift if you live in a high tax location like NYC.
Here is how I get to that math, using NYC tax rates:
less $50,000 for the tax benefit of the charitable gift deduction
less $38,000 for the capital gains taxes that do not have to be paid on the stock
So if you have highly appreciated publicly traded stock and are interested in giving to good causes, consider gifting stock instead of cash.
It is a great way to be generous.