Consider Donating Highly Appreciated Stock

If one has long gains on highly appreciated stock, it may be beneficial to consider donating the stock instead of cash.   If one sells the stock to donate cash, taxes will need to be paid on the gains.  If one donates the appreciated stock directly, the fair market value (FMV) of the stock can be deducted as a contribution without paying any taxes.

Here is the tax efficiency:

• The contributor pays no income tax on the gains.
• The contributor deducts 100% of the FMV of the stock, if they itemize deductions on Schedule A.
• The receiver gets the FMV of the stock, if they sell immediately.

I've done this several times when contributing to charitable organizations.  It was satisfying to make a larger contribution while also eliminating our income tax liability for long term gains on appreciated stock.

For more on The Practice of Personal Finance, check back every Wednesday for a new segment.

This is not financial nor tax advice. Please consult a professional advisor.

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