Remarkably, 1999 is drawing to a close, and the new millennium is upon us. Now is the time to review our plans and to insure that we are prepared for the 21st Century. Year-end is generally the time when many of us make charitable gifts. For U.S. taxpayers, donations to nonprofit organizations such as MSIA offer the benefit of a tax deduction, for example, an outright cash gift can provide you with a deduction for the entire amount of your gift.
There are gifts that offer even greater advantages to the donor. Appreciated assets, like common stock for example, can give the donor expanded benefits under certain circumstances. Look at the stocks you have held for at least a year and a day. Which ones have appreciated the most? It may be prudent for you to make your year end gift using one or more of these stocks and here’s why: If you sold the stock, you would incur capital gains tax on the appreciation. However, if you made a gift of the stock to MSIA, and MSIA, in turn, then sells it, no one pays capital gains tax.
As an example, let’s say that you decide to make a donation to MSIA, and you are going to sell $6,000 of common stock in order to make your gift. The stock you want to sell was purchased for $2,000 several years ago, so you have a gain of $4,000 in the stock. You would have to pay $800 in capital gains tax ($4,000 x 20%) on the sale of this stock. This would leave you with only $5,200 to donate to MSIA. The overall transaction would result in a $5,200 tax deduction for you, MSIA receives $5,200 and the IRS receives $800.
However, if you gave the stock as a gift to MSIA, MSIA receives $6,000 in value, you receive a charitable deduction for the full value of the gift, $6,000, and there is nothing due to the IRS on the transaction. And what’s more, if you can’t use all of the income tax charitable deduction resulting from the gift, you may carry it forward for up to an additional five years. Such gifts are deductible up to 30% of your adjusted gross income.
Mutual funds, real estate and other appreciated assets can make great gifts as well. It is important to note that, tax wise, gifts of appreciated assets take more time to complete and can require advance planning. Before making any significant gifts, it is important to consult with your tax accountant, attorney or other qualified advisors to help you to understand the impact of your gift on your income tax return.
The MSIA accounting office, also known as the MSIA Donor Support Team, would like to remind you that it is best to send your donations well before December 31 if you want them to be counted in the 1999 tax year. Remember that the mail is slower at this time of the year and transactions like transfers of stock can take several days even when all goes smoothly.
For answers to your year-end donation questions or any type of assistance related to year-end giving plans and the options available to you, please contact any of the MSIA Donor Support Team – Wendy, Bambi, or Mark at (323) 737-4055, or by e-mail at givingtomsia@msia.org, or by U.S. mail at: MSIA, P.O. Box 513935, Los Angeles, CA 90051.
God bless you.