Securities, real estate, or tangible personal property can be excellent ways of making a gift to Stephens College. You do not pay federal capital gains taxes if you transfer appreciated property to Stephens. It is important to transfer appreciated property before selling it. However, if property has decreased in value, you should sell the assets before making the gift, thus establishing a capital loss and potential tax deduction.
Melanie purchased stock in 1985 for $250. The stock is now worth $1,000, which is approximately the same amount that Melanie would like to give to the Stephens College annual fund. If Melanie gives the stock to Stephens College instead of cash, the College receives a gift of $1,000- the fair market value of the stock - and Melanie can claim a $1,000 charitable deduction on her next income tax return. In a 35% bracket, that is a tax savings of $350. Furthermore, Melanie avoids $113 in capital gains taxes that would be due whenever she sold the stock. The result: After figuring the tax savings, a gift of $1,000 costs Melanie only $537.
When her parents die, Elizabeth decides to donate their home to Stephens College rather than sell the home herself because her financial advisor warns her that she will have to pay significant capital gains tax on the home by selling it. Instead, she establishes a charitable trust with the College and gives her parents' home to the trust. The trust then sells the property, avoids capital gains tax and uses the money to pay Elizabeth annual income for the rest of her life. Also, at the time Elizabeth makes this gift, she has owned the property for one year and thus is entitled to an income tax deduction equal to the fair market value of the house. (If she sold the house before owning it for one year, she would still be entitled to a tax deduction, but it would be limited to the amount that her parents paid for the home when they originally bought it.) Upon Elizabeth's death, the remainder of the trust becomes a gift to Stephens.