Securities & Stocks

Gifts of appreciated property have been considered the “best value” in charitable giving. That is because there are multiple benefits to making a gift of this type. In addition to a charitable contribution tax deduction, you generally are able to avoid paying capital gains tax on the increase in value of the assets. What follows is some basic information on how property like this is valued, its benefit to you as a donor and how to transfer these properties.

Factors to Consider

Definitions

Long-term property is property that has been held for longer than 12 months. Property held less than 12 months is considered short-term property. There are significant benefits to gifts of long-term property, including a charitable deduction based on the fair market value of the stock and the ability to avoid paying tax on capital gain. Depreciated stock is an asset that has lost value since it was purchased and generally should not be gifted, as the donor cannot take the loss for tax purposes

Publicly held or closely held stock

Stock can be either publicly held or closely held. Publicly held stock is traded on an exchange and can be purchased by anyone. It is usually easy to value, with market prices printed daily in financial publications such as the Wall Street Journal. Closely held stock is typically owned by a few individuals, often family members. It is more difficult to value and is not freely traded. For charitable gift purposes, either can be donated, although most gifts are made in publicly traded securities. The UW Foundation may choose to accept gifts of closely held corporation stock on a case-by-case basis.

Date of gift

When you contribute either certificates or transfer stock from a brokerage account, the date is easy to control. However, if you elect to have shares re-registered in the name of the UW Foundation, the date is uncertain due to the time required for re-registration.

Valuing the Gift- Your Charitable Deduction

When you give long-term appreciated stock that is publicly traded to the UW Foundation, you receive a deduction for the fair market value. That value is the “mean market value,” which is the average of the high and the low price on the date of gift. Closely held stock usually requires an independent appraisal to determine value. Gifts of appreciated stocks are deductible up to 30 percent of your adjusted gross income in the year of the gift and if the amount of the deduction exceeds that amount, you may carry your remaining deduction forward for up to five years in the future.

Claiming Your Deduction

You must itemize your tax return to claim any charitable deduction. The UW Foundation will provide a receipt to you for your gift that complies with the current IRS regulations. You should file a form 8283 with your tax return to claim your deduction, completing section A of that form. For gifts of publicly traded securities, the charity does not need to sign the form.

Re-registration of the Stock

While it is possible to do this, it is not a procedure that we recommend. Usually you will need to take the certificate to a banker or broker, and they would send the certificate to the transfer agent to have it re-registered in the name of the UW Foundation. When the process is completed, the transfer agent will mail a new certificate to the Foundation.

Note: There are several reasons why we do not recommend this procedure. The transfer agent will not provide the UW Foundation with the name of the donor; we will just receive a new certificate in our name. If you use this method, you must notify the UW Foundation of the name of the stock you are donating and the number of shares. Also, your date of gift will be very uncertain using this method. The gift is not final until the re-registration is complete and there is no way to tell in advance when that will happen.

If the Stock is in a Brokerage Account

Request that the bank or broker holding the stock contact Bridget Bush at the University of Wisconsin Foundation for instructions. In most cases, a transfer can be arranged that will allow the gift to be made at a time of your choosing to maximize your tax benefits.

If you would like more information on appreciated gifts of securities, please contact Bridget Bush at 608-308-5469.