Giving gifts of stock: The basics
5 questions with Jeff Mindlin, vice president of investments, ASU Enterprise Partners
What are some of the ways one can give appreciated investments as a gift?
There are two ways to donate appreciated investments: the first way is to sell the stock, bond or mutual fund share and donate cash proceeds from the sale. Alternatively, securities can be contributed directly as a gift in-kind
How can gifts of stock or mutual funds maximize tax benefits?
A gift of appreciated securities may qualify for a charitable tax deduction and may avoid the long-term capital gains tax on the appreciated value of the asset. Stocks or bonds held more than one year that have increased in value may qualify for a deduction equal to the full market value of the gift.
For example, let’s say you purchased a stock a few years ago for $25,000 and that stock is now worth $100,000. If you donated the stock, you could get a full deduction of the $100,000 while avoiding the $75,000 taxable capital gain.
With stocks or bonds worth less than the price you paid for them, the wisest course is to sell them and donate the cash proceeds. The sale will establish a loss that may offset other capital gains income.
How are gifts of stock used by the ASU Foundation?
In the past, appreciated securities were donated to the ASU Foundation as outright unrestricted gifts, to establish an endowment or to directly support any of 5,000+ campus initiatives.
Is there a maximum or minimum dollar amount worth of stocks required to make a donation that benefits ASU?
There is no minimum or maximum required dollar amount. However, if the proceeds intend to establish an endowment, there might be minimum guidelines.
Recently, we have seen an uptick in corporate officers and directors gifting a portion of their company shares. In most cases, this works like any other stock gift, but can get more sensitive with smaller companies whose shares do not trade with as much liquidity. In these cases, we exercise great care to ensure that liquidating the shares has minimal market impact to stock price. We can coordinate our efforts between the donor and trade desk to work out of the stock over a prescribed amount of time to minimize market impact while maximizing value of the deduction and value of the gift to the university.
What are some reasons that might make it a good time to donate stock?
With the stock market at all-time highs, it is likely that donors are holding onto stocks that have large unrealized capital gains.
At the same time, we are currently in the second longest bull market in history. While most experts do not see a big crash around the corner, the risk vs. reward is starting to get less attractive as stock valuations get stretched and complacency grows.
All things considered, it may well be a good time to take advantage of the high levels of the stock market to maximize the value of a deduction before we see any kind of sell-off that might lessen the impact of the gift as well as the potential tax write-off.
We encourage donors to consult with their tax advisors for questions about the deductibility of their gifts. To make a security gift or learn more, please visit https://www.asufoundation.org/types-of-gifts/gifts-of-securities.