027 DGM – Tax-Smart Donors Give Appreciated Stock to Charity

Tax-smart donors give appreciated stock to charity

Welcome. This is the podcast that helps you do good even better — regardless of which charities or causes you support. 

This is Ed Long. Each week on this podcast I talk about charities and provide actionable tips to help donors and volunteers to take their philanthropy to the next level and do good even better.

Give smart from your heart, because doing good matters.


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Episode sponsor

  • Today’s sponsors are the dates April 15 and May 15.
    • April 15 is the well-known due date for individual income tax returns in the U.S.
    • May 15, however, is the due date for annual returns to be filed by most charities and other nonprofits.
    • What if a nonprofit fails to file? Organizations that fail to file annual reports for three consecutive years will see their federal tax exemptions automatically revoked as of the due date of the third required filing. By the way, churches and church-related organizations are not required to file annual reports.
      • How many nonprofits have had their tax exemption automatically revoked for failing to file? The total was 551,068 as of May 7, 2014.
    • Want more details?
    • At CharityCheck101.org you can find the tax-status of every nonprofit currently recognized by the IRS. Revoked organizations are promptly dropped from the CharityCheck101.org list.

Main topic

  • Tax-smart donors give appreciated stock to charity
    • Background
      • Tax SmartWhat’s the capital gains tax? Simply put, it’s the tax that applies when you sell a capital asset (like a stock) for more than it cost you. It’s part of the income tax system.
      • Selling appreciated assets during your lifetime produces taxable capital gains.
      • Charities don’t pay income taxes or capital gains taxes on donated assets.
    • How it works
      • Here’s an example:
        • Several years ago, you bought 10 shares of Surprise Corp. at $10. Today, each is worth $100 – your $100 investment has become $1,000. Today, you want to make a $1,000 donation to your favorite charity that’s qualified to deductible charitable contributions. Two different approaches (shown below as Plan A and Plan B) produce very different results. I suggest you go with Plan B!
            • Plan A: You sell the 10 shares and give the net proceeds to charity.
              • You receive $1,000 (before commissions).
              • You have a $900 taxable capital gain.
              • You pay $180 in taxes (using an estimated combined Federal and state tax rate of 20%).
              • You net $820.
              • You add $180 and make your $1,000 donation.
              • Result: You do good and receive a $1,000 charitable deduction — at a cost to you of $1,180 plus commissions.
            • Plan B: You give the shares directly to the charity.
              • You have no taxable capital gain.
              • You are making a donation of $1,000.
              • Result: You do good and receive a $1,000 charitable deduction — at a cost to you of $1,000. That’s tax-smart.
            • Side-by-side comparison:

          Plan A

          Plan B

          Charitable Deduction

          $1,000

          $1,000

          Your Cost

          $1,180 plus brokerage commissions

          $1,000 in stock

      • If you have a stock that you know has gone up in value over the years but you don’t have the records to tell how much it cost you, it’s a prime candidate for donating to charity. Why? Because if you sell it you’ll have to be able to prove to the IRS what it cost you (your “cost basis”). If you donate at, your cost doesn’t matter.
      • Another way to avoid capital gains taxes is to hold on to the appreciated asset until you die. Assets included in your estate when you die are treated for capital gains purposes as if you bought them at the market price on the date you die. This is commonly referred to a “basis step-up.”
  • Your smart and easy assignment for today
    • Look at your investments. Do you have appreciated stocks? Look into donating shares of appreciated stock, rather than cash.
  • A big part of giving smart from your heart is understanding the tax-impacts of your giving. 
  • Had experiences? Have feedback? Share your thoughts  in the Reply / Comment section at the bottom of the page. Or email me at ed[@]seriousgivers.org

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About Ed Long, the podcaster

Podcaster Ed Long has been preparing more than 40 years to do this podcast. He knows charities and the rules that apply to them. He’s analyzed charity finances and operations.  He’s founded and run charities, and volunteered for them. He’s helped the public and law enforcement fight fake charities, and has served as a philanthropy educator and coach. Before all that he worked as a partner with a major Wall Street law firm. Ed is the founder and CEO of SeriousGivers, which itself is a charity. Ed knows the great work that strong charities can do with the resources entrusted to them, and is passionate about helping others find and support strong charities.