Skip to content

Archive for November, 2014

1
Nov

Now is the time to make 2014 charitable gifts of appreciarted assets.

Using appreciated assets for charitable gifts can be very beneficial.  The ta x deduction, if applicable,  is based on the fair market value on the date of the contribution.  The appreciation is not subject to income tax.  There are exceptions and special rules that may reduce or eliminate the benefit of the tax deduction.

The deduction limitations depend on the type of property given and the type of organization receiving the property.

Avoid using property that has depreciated in value.  The loss on such property cannot be deducted if the property if donated.  Sell the asset if you want to use it to fund a charitable contribution.  You can deduct the loss, subject to limitations and restrictions, if you sell the property and donate the proceeds.

Capital tax rates are determined by the type of asset and the holding period.  The appreciation will be taxed if the gain is does not qualify for capital gains (ordinary gain).    Make sure you have held the property long enough for capital gain treatments.

Do not assume the information is the same as the last time you used appreciated assets to make a charitable contribution.

Contact the charitable organization before making the contribution.  Verify that the organization is still a “qualified organization”.  Determine what their current procedures are before you make the contributions.  Make sure they will accept the property you want to donate.  Some organizations will not accept property other than cash, checks, credit card, etc.  Those that accept other forms of payment may only accept marketable securities.

Next check with your custodian to find out what their current procedures are. The forms required and the time to process the transaction may have changed.  All custodians (for corporations, brokerage, mutual funds, etc.) procedures are not the same.

Obtain a “qualified appraisal” if the property is not a marketable security.  The procedures are different depending on the type of property and the value of the contribution.

The above is not intended to be a complete discussion of this topic.  Be sure to consult with you tax advisor to determine how the transaction applies to you.

You may not be able to complete the gift before year-end if you wait too long.  Be sure to give your tax advisor adequate time to evaluate the planned transaction and see if the benefits are what you intend.