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November 21, 2011

Limited time available to complete non-cash charitable gifts before year-end

Using appreciated publicly traded securities to make charitable contributions can be an excellent year-end tax strategies.  If the securities have been held more than a year the appreciation (gain) on the securities that are transferred directly to a charity are not taxed.  Your deduction is the full fair market value on the date of the transfer.  If you sold the securities, the proceeds would be reduced by taxes.  That is, you after tax cost of making the contribution is less if you use appreciated publicly traded securities. 
You do not want to use securities that are worth less than your cost (basis).  In that case it would be better to sell the stock, deduct the loss and donate the cash proceeds to charity.
Be sure to allow enough time for the transaction to be completed before year-end.  Some custodians require 30 days to process the transaction.  Many charities have established brokerage accounts for this purpose.  You will need accurate information about the charities’ brokerage account to complete the transaction.  You should verify the information even if you made contribution to that account in the past.  If the account has been changed or moved the information you have about the account may not be accurate.  
If you want to donate publicly traded securities for 2011 you should follow-up before the end of November.
There are limitations and restrictions that may determine if this strategy would be beneficial for you.  Discuss this with your tax advisor before making the non-cash contribution. 

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