One of the best things about having highly appreciated publicly traded stock is that it is the most attractive way to make charitable gifts.
The Gotham Gal and I do this all of the time and I encourage others (founders, early employees, investors, angels, etc) to do it.
Here’s how it works:
Let’s say you have shares of Facebook that you got when you joined back in 2006.
Let’s say that your exercise price was $3/share and that is your cost basis.
Let’s say you want to make a $100,000 gift to a great cause that you are deeply involved with.
Instead of taking out your checkbook (who does that anymore?) and writing a $100,000 check, consider gifting some Facebook shares.
At $175/share, a $100,000 gift would be 571 shares.
So you ask the charity if you can gift shares. Almost every time I do that, the answer is yes. They give you a brokerage account that you can “DTC” the shares to.
And you instruct your brokerage firm to move the 571 shares to the charity’s brokerage account and you have made a $100,000 gift.
But, because you no longer have to pay the capital gains taxes on those shares when you sell them, and neither does the charity, you have a much more tax efficient gift.
I figure that a stock gift costs about 10-20% of the dollar value of the gift if you live in a high tax location like NYC.
Here is how I get to that math, using NYC tax rates:
$100,000 gift
less $50,000 for the tax benefit of the charitable gift deduction
less $38,000 for the capital gains taxes that do not have to be paid on the stock
equals $12,000
So if you have highly appreciated publicly traded stock and are interested in giving to good causes, consider gifting stock instead of cash.
It is a great way to be generous.
