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Efficient Tax Planning for Charitable Gifts

Edge Magazine
03.2018

Smart gift planning includes combining a donor’s charitable intent with income tax efficiency. As a donor, you want to assure you are maximizing your gifts to your favorite charities, while also maximizing your personal income tax benefits. Gifts of long-term appreciated assets can achieve both objectives.

A gift of property that a donor has owned for more than one year provides a potential double benefit to the donor from an income tax perspective. First, the donor generally will not realize any capital gains at the time he or she makes the gift, thereby avoiding the payment of capital gains taxes on the amount the property appreciated in value while the donor owned it. Second, the donor is permitted to deduct the full fair market value of the gifted property on the donor’s income tax return, subject to applicable IRS limits and carryover rules.

The simplest example of this gifting technique is to consider a gift of stock. If you purchased a share of stock for $100 over one year ago, and you donate it to a qualifying charitable organization when the stock’s value equals $1,000, then you avoid paying capital gains taxes on the $900 of appreciation. In addition, you could receive a charitable deduction equal to the current value of $1,000, depending on your adjusted gross income and the overall charitable donation limits.

Another appreciated asset that donors may not immediately consider gifting to charity is ownership in their business. When you begin thinking of business succession planning, whether due to retirement or moving on to a new venture, one of the biggest challenges an owner faces is determining how to exit the business with minimal income tax consequences. Working with your advisory team and a charity to evaluate your planned giving options in this situation may provide a unique solution to meet both your business and charitable legacy goals.

Gifting publicly traded stock is very easy to do and may be accomplished quickly. Gifting a business interest is more complicated and therefore should be explored well in advance of the planned transition date. In either situation, donors should consult with their tax advisor as they evaluate their options in supporting charities and the constituents those charities serve.

ABOUT THE AUTHOR – LISA M. LEHAN 

I am a shareholder of Koley Jessen P.C., L.L.O., located in One Pacific Place. My practice is focused on estate and tax planning. Outside of the office, I enjoy spending time with my husband and our three children. For help with your family’s estate planning needs, please contact me directly at 402.343.3881.

To view article in original publication please visit: http://edgemagazine.com/the-write-plan-3/

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