Opportunities to Maximize Your Charitable Gift - Part 1

Marshall Rathmell |


As the holiday season approaches, many people begin to think about giving and helping others.  We typically get questions as to how to most effectively and advantageously give donations and charitable gifts.  Marshall has written a series of short stories that help describe how donors of all types and ages can maximize their benefits while benefiting others. 


In a recent discussion, a young professional couple was looking for the most tax-efficient way to meet their charitable commitment.  This couple heard that gifting appreciated assets was an option, but informed me that it didn’t make sense for them since they were still accumulating towards their life goals.  They are in a stage where they need to grow their investments, not give them away.  They believed their only prudent action was to donate using their current income.


While they were correct that their current plans and goals were not conducive to reducing their portfolio, they were missing an opportunity to enhance the after tax benefits of their portfolio.  Over the last 5 years, the market has gone on a substantial run leaving their equities with relatively low cost basis.  In particular, they had a domestic mutual fund investment that was 48% principal and 52% long term capital gains.  While they were excited about the gain, they also realized that upon sale it would come with a hefty tax bill.  I explained to them that their charitable commitment is an opportunity to reset their cost basis.  By gifting the asset and replacing it with the cash they intended to donate, they were able to repurchase the same asset, thus increasing their cost basis to the current value.


Gifting appreciated assets can be a benefit to both the charity and donors of any age.  When you donate stock or other intangible long-term capital gain property to a qualified public charity, you can deduct the full Fair Market Value of the property to the extent that it does not exceed 30 percent of your adjusted gross income. Any amount that cannot be deducted in the current year can be carried over and deducted for up to five succeeding years. You benefit in two ways:

  1. You get a tax deduction
  2. You remove interest, dividends, and/or capital gains from your investment portfolio

If you wish to donate highly appreciated assets to charity, however, it is important to apprise yourself of all relevant rules. Also, certain types of property may be more advantageous to donate to charity than others.


-Marshall Rathmell-


Click here to see Part 2



*Some of the material above was prepared by Broadridge Investor Communication Solutions, Inc.

**Before making a donation of appreciated assets or any other charitable strategies consult with a competent tax and/or legal professional to understand the effects on your specific situation