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Stock for a Gift Annuity: A Great Trade

The stock market seems to hit new highs every day, providing an opportunity for donors to cash in on their investment success, minimize taxes and possibly increase annual income.  How?  Just contribute shares you have owned more than one year for a charitable gift annuity.

Consider the case of George, a retiree who is thinking about selling some stock.  Unfortunately, George will owe significant capital gains tax when he sells.  But if he gives the stock to charity for a gift annuity, he can reduce capital gains taxes, receive annual payments between 4.7% and 9.5% (based on his age) and qualify for a sizable charitable deduction that may enable him to itemize on his income tax return.

In George’s case, let’s assume he is age 78 and bought the stock for $6,000 many years ago.  It’s now worth $20,000 and selling would cost him $2,100 in capital gains tax.  But look at the results if he gives the stock to us for a charitable gift annuity:

  • We will pay him $1,360 (6.8%) for life, no matter how long that may be;

  • He receives an income tax deduction of about $9,600;

  • George avoids tax on nearly half of his capital gain and the rest is reportable in small installments over his life expectancy;

  • A portion of George’s annual payments is tax-free for his life expectancy.

Most satisfying to George, however, is that his gift supports charity.



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