Gifts of Stocks or Securities

One of the best ways to make a gift to Wellspring, Inc., either through a Wellspring, Inc. contribution or a restricted gift, is to donate appreciated securities. In most cases, the out-of-pocket cost of your gift is reduced substantially due to the "double" tax benefit you realize when you contribute appreciated securities:

First, you are entitled to an income tax charitable deduction for the full fair market value of appreciated securities if they have been held for at least one year (or for your cost basis if they have been held for less than on year).

Second, you pay no capital gains tax on the transfer.

Example:

John Doe would like to make a $50,000 gift to Wellspring, Inc., in honor of his son who received services from Wellspring as a youth, but it would be difficult for him to make a cash gift of that magnitude. John owns stock that has appreciated from his cost basis of $10,000 to its $50,000 current fair market value. On the advice of his tax advisor, he decides to use the appreciated stock to make a special gift to Wellspring, Inc. In doing so, John essentially makes a $50,000 gift to Wellspring at an out-of-pocket cost to him of just $22,200.

The following table illustrates the numbers behind his decision to make a stock gift:

Stock Cash
Market value of the gift: $50,000 $50,000
Cost basis: $10,000 $50,000
Unrealized capital gain: $40,000 $0


When the Gift is Made to Wellspring, Inc.:

Allowable charitable deduction:
Stock $50,000
Cash $50,000

Income tax saved: (39.6% federal tax bracket x $50,000 deduction)
Stock -$19,800
Cash -$19,800

Capital gains tax saved: (20% federal rate x $40,000 gain)
Stock -$8,000
Cash $0

Out-of-pocket cost of gift: (gift value less income and capital gains taxes saved)
Stock $22,200
Cash $30,200

John is delighted that the tax benefits of donating appreciated securities provide an opportunity for him to make this wonderful gift to Wellspring, Inc.

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