Securities Example

As they do every December, Patrick and Elaine are preparing to write a check for $5,000 as a year-end gift to their favorite charity. They hold $8,000 in appreciated stock that they bought 10 years ago for $5,000. If they sell the stock, they will incur a significant tax bill because of the capital gains on the stock.

By using the $8,000 in appreciated stock to make a gift directly to their favorite charity this year, they avoid the capital gains tax. Because of the “appreciation factor” of the stock gift, they end up donating a greater dollar amount to the charity without it affecting their current cash flow.