Part Gift and Part Sale
Wilma and Mike Bennett bought their first home many years ago. As they were landscaping in the yard, painting and fixing up that home, Mike was impressed with the home improvement store. During many visits to the store, Mike felt that the home improvement staff was very friendly and helpful. Although Mike and Wilma did not have a lot of resources, they decided to buy stock in that store.
MIKE: Over the years, that stock in the home improvement store increased in value. It now is worth much more than we paid for it. We paid about $10,000 for the stock and it is now worth almost $50,000.
WILMA: The stock has gone up greatly in value, and we are now thinking of selling that stock. We want to sell and reduce our tax. We would like to sell the stock and write a check for $5,000 or 10% of the stock value to a local charity.
MIKE: I happened to be talking to an advisor from a charity at a community luncheon. He mentioned that we could probably give about twice as much with almost the same cost if we gave stock rather than writing a check.
After talking to the advisor, we discovered that if we gave $10,000 of stock, we would receive two benefits. By giving the stock instead of writing a check, we get our income tax deduction. Plus, we also save the capital gains tax on the $10,000 worth of stock.
WILMA: That is what we decided to do. By giving $10,000 of stock directly to the charity we saved the capital gains tax on that part. Then the deduction for the gift offset a large portion of the tax on the remaining $40,000 worth of stock that we actually sold. We are very pleased with the "double benefit" from giving the stock, and the charity has received a very nice gift, which was more than we originally thought we could give.