Posted on September 27, 2006 at 17:45:04:
Donating appreciated securities to charity presents the donor with a couple of immediate tax advantages. First, of course, there is the tax deduction for a charitable contribution. But even a cash contribution gets you that deduction. What makes it smarter to give securities instead is that no capital gains tax is due on any appreciation of the securities during the years the donor owned them. The donor gets credit for the full current value of the gift. (Even though many charities will deduct the cost of selling the securities from the credit given, the donor generally will still come out ahead.)
What if the security is a good value, one still worth holding? That offers yet another opportunity: the donor can buy it back on the market (perhaps with the taxes saved), this time with a higher basis, and save on capital gains taxes in the future.