Learning About Giving Securities

 

Giving securities that have appreciated in value since you purchased or acquired them is one of the most tax-wise donations you can make. 

First, in most cases, when you donate securities that are worth more than you paid for them, you do not pay any capital gains tax. The USS Midway Museum takes on your cost basis. And since we are exempt from income taxes, the USS Midway Museum pays no tax when it sells the asset. Therefore, the capital gains taxes you would have paid had you sold the securities instead of giving them is eliminated forever!

  1. Donor transfers securities directly to the USS Midway Museum.
  2. The USS Midway Museum sells securities, pays no capital gains tax and receives cash from sale.
  3. Donor receives charitable income tax deduction and pays no capital gains taxes on sale of the securities.

In addition to eliminating capital gains taxes, when you donate appreciated securities such as stock, mutual funds or certain other securities to a charitable organization such as the USS Midway Museum, you also receive an income tax charitable deduction for up to the full fair market value of your gift. 

The amount of your deduction is generally based on how long you held the securities. If you held it for at least one year, it is considered long-term capital gain property and your deduction is generally the full fair market value on the date of your gift. 

As a general rule, if you have held the securities for less than one year, they are considered short-term capital gain property and your deduction is limited to the lesser of its fair market value or the amount you paid for them (your cost basis).

For these reasons, it is usually a better idea to contribute appreciated securities you have held for at least one year in order the maximize your tax savings.

In summary, the combination of avoiding capital gains taxes and receiving an income tax charitable deduction is like receiving two tax deductions. This is why if given a choice between giving appreciated securities and giving cash, giving appreciated securities is typically the better choice. We suggest you consult with your tax advisors to confirm how a gift will affect your tax planning.

(See Frequently Asked Questions for more details)

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