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donate: stock giving guide

Take a charitable income tax deduction
Imagine giving a gift of appreciated securities (stocks, bonds, mutual funds), benefiting our community and realizing tax savings. Sound too good to be true? Federal law permits taxpayers who itemize to deduct the current value of charitable contributions from their adjusted gross income.

Capital gains tax savings
By contributing long-term appreciated securities through the 2005 United Way Community Campaign, you avoid the capital gains tax that would otherwise be due if you sold the securities for your personal benefit.

Here's how you can put a gift of stock to work for you
Assume you purchased 100 shares of XYZ Corporation in 1985 for $2,000. Today, the shares are worth $10,000. If you sold the stock, you would realize an $8,000 capital gain. With current tax rates you could owe as much as $1,600 in federal capital gains tax.

You decide to make a $10,000 charitable gift to the Community Campaign to help our community. You usually make your gift by payroll deduction or check, but decide to see whether a gift of stock would work better for you. Here are the comparisons (federal tax benefits only):

      Option A:
give securities (Basis of $2,000)
    Option B:
Cash or Check
    Option C:
sell securities and give cash
value of gift     $10,000     $10,000     $10,000
income tax savings
(assuming 35% tax rate)
    ($3,500)     ($3,500)     ($3,500)
capital gains tax
(assuming 15% tax rate)
    ($1,200)     n/a     $1,200
net cost to donor     $5,300     $6,500     $7,700

The example above illustrates the potential benefit of gifts of long-term appreciated stock and highlights some of the maximum available benefits. We strongly advise you to contact your accountant or tax advisor to determine the exact income tax effect of your donation.
To calculate an illustration of the benefits of giving securities versus cash, visit the following Internet site: http://stock.unitedway.org

Federal Tax Law as of January, 2005

Giving a Gift of Securities is Easy

  • If you hold securities in “street name,” that is, you do not have physical possession of the stock certificate, please notify your broker to initiate a “broker to broker” transfer. Please tell your broker to donate the stock to United Way of the Capital Area. (It is important to use the full name as there are many other United Ways in the state.) Your broker will then transfer the securities to this United Way’s account to benefit the Community Campaign. It is important that the securities be transferred to United Way’s account prior to being sold in order to avoid capital gains taxation. For your convenience, United Way of the Capital Area has accounts set up at all major brokerage houses to accept gifts of securities.
  • If you have physical possession of the actual stock certificate, you may send the unendorsed stock certificate by express registered or certified mail, return receipt requested, to United Way of the Capital Area (see address below). At the same time, an executed stock power should be sent in a separate envelope to United Way. Copies of the required stock power may be obtained from a bank, broker or United Way.
  • Like stock, mutual fund shares can be contributed to the Community Campaign and carry the same tax benefits associated with outright gifts of stock. Because United Way must set up an account with your mutual fund in order for you to make a direct, tax-deductible transfer, you must notify us of your intention to make such a gift before October 1 to assure the gift is deductible in this tax year and to minimize taxes owed by you on distributions.

Valuation for tax purposes and date of gift
The date of the gift is the day the stock passes from your control. For gifts of securities held longer than one year, the value for the income tax purposes is the mean between the high and low quoted selling price on that day. Your gift will be acknowledged by the Community Campaign with the valuation of your gift for tax purposes.

Important: We recommend that United Way not be indicated astransfereeon the assignment form on the back of the stock certificate or on the stock power, and that the stock not be sent to a transfer agent for registering in United Ways name. These procedures usually result in needless delay and expense.

Questions? Contact Leigh Smead at (860) 493-6847 or email lsmead@uwcact.org.

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