Gifts of Appreciated Securities

Gifts of Appreciated Securities

Giving appreciated securities directly to Samaritan's Purse might be more beneficial in terms of taxes than giving cash.

If you donate listed securities, such as stocks, bonds, and mutual funds directly to Samaritan's Purse, there is no capital gain tax to be paid. However if you cashed in the securities, 50 per cent of the appreciated capital gain is added into income and then open to tax. After paying the taxes, the amount of the gift to the charity is reduced and therefore the amount of the donation receipt is reduced, reducing your charitable donations tax credit as well.

However, by having your broker transfer the securities directly to the broker of Samaritan's Purse, you give a larger gift, pay no tax on the capital gain and receive a larger donation receipt which generates a larger tax credit. Here is an example of how this works:

Emily wants to give a gift to Samaritan's Purse and she was planning to sell some of her stock. The stock currently has a market value of $10,000. She purchased the stock for $5,000 several years ago, so there is a capital gain of $5000. She was going to sell the stock and give the cash to Samaritan's Purse. But she heard that there is significant benefit to giving the stock directly rather than cashing it in. The benefit to Emily is calculated below: (*A 45 per cent tax credit rate it used in the calculations)

 

Sell Stock

Donate Stock Directly

Market Value of Stock

$10,000

$10,000

Initial Cost of Stock

$  5,000

$  5,000

Capital Gain

$  5,000

$  5,000

Gain Open to Tax (%)

(50%)  $  2,500

(0%)  $  0,000

Gain Tax Rate - 45%

(*45% x 2500)  $  1,125

(*45% x 0 )  $  0,000

Net Proceeds

($10,000-$1,125)  $  8,875

(10,000 - 0 )  $10,000

Donation Receipt

$  8,875

$10,000

Tax Credit

(*45% of 8,875)  $  3,993

(*45% of 10,000) $  4,500

Net Tax Benefit

(3,993-1,125)  $  2,868

$  4,500

Difference of Net Tax Benefit $  1,632

 

If Emily sold the stock, she would pay $1,125 tax on half of the capital gain. She would have $8,875 left, reducing the amount given to charity. Emily would receive a donation receipt for $8,875, which would generate a tax credit on her year end taxes  of $3,993. (Fourty-five per cent of $8,875.)

If Emily gave the stock directly to charity, she would give the charity $10,000. She would pay no tax on the capital gain. Her donation receipt of $10,000 would allow her to claim on her year end taxes a tax credit of $4,500. (*Fourty-five per cent of $10,000.)

By donating stock directly, Emily pays no capital gains tax (instead of $1,125), receives a tax credit of $4,500 (instead of $3,993), and Samaritan's Purse is given $10,000 instead of $8,875.

Talk to your financial advisor about the value of giving a gift of appreciated securities.

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