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Stocks and Securities

When you donate marketable appreciated securities that you have held for at least one year, you not only give a lifetime gift to United Way, but you also may realize tax savings. You avoid the tax on the capital gains resulting from the increase in value of the securities. These taxes will have to be paid if you sell the securities for your personal benefit.

For federal income tax purposes, you can deduct the value of the securities on the date of contribution. The value of the contribution is the average of the high and low quoted selling price on the date the securities pass from your control.

Deduction for this type of gift is subject to an annual limitation of 30 percent of your adjusted gross income. Any excess can be carried forward for a period of five years. Contact your tax adviser to determine the amount of the excess that may be deductible in any carry-over year. Your gift will be acknowledged by United Way of Greater Cleveland, indicating the valuation of your gift for tax purposes, which will also serve as your IRS receipt for tax-deduction purposes.

You can also realize tax benefits if your securities have depreciated in value. By selling your securities at their depreciated price and giving the cash from the sale to United Way of Greater Cleveland, you can receive a charitable deduction for the cash donated and can claim a short- or long-term capital loss on the difference between your cost for the securities and the fair market value on the date you sold the security.

There are two ways to donate stock to United Way of Greater Cleveland...

If you hold securities in "street name," that is, you do not have physical possession of the stock certificate, please notify your broker to initiate a "broker-to-broker" transfer. This will transfer the donated stock from your brokerage account to United Way's brokerage account, at which time United Way will liquidate the donated stock.

Provide United Way's finance division with the following information regarding your gift:
  • date of gift
  • number of shares
  • name of security
  • name of brokerage firm
  • name and phone number of your specific broker
Please communicate the above information either in writing (preferred method) or by phone to:
    Appreciated Securities
    United Way of Greater Cleveland
    1331 Euclid Avenue
    Cleveland, OH 44115
    (216) 436-2132
United Way of Greater Cleveland will send you an acknowledgment of this transaction, which will also serve as your receipt IRS receipt for tax-deduction purposes

If you have physical possession of the actual stock certificate, please send each unendorsed certificate and a brief letter of transmittal that states your name and address and that you intend to transfer that stock as a gift to the address above. Please deliver the above via first class mail or by hand.

Under separate cover, send one stock power for each security to the above address and include one photocopy of the transmittal letter that accompanied the stock.

United Way will sell your securities and send you an acknowledgment of this transaction, which will also serve as your IRS receipt for tax-deduction purposes.
Doing the math
Let's say that 10 years ago you purchased publicly traded stock for $4,000 that is currently valued at $10,000. If you sold the stock, you would realize a $6,000 capital gain. Under current tax rates, you could owe $1,200 in capital gains tax.

This year, you decide to make a $10,000 gift to United Way, the amount you usually donate through payroll deduction or check. This year, however, you decide to see whether a stock gift would work better for you.

Cost-Saving Comparison (federal tax benefits only)
Option Give securities
as gift
Give $10,000
by check
Sell securities
& give cash
Gift Value $10,000 $10,000 $10,000
Capital gains tax* 0 N/A $ 1,200
Income tax refund* $ 3,100
($1,200 saved)
$ 3,100 $ 3,100
Net tax savings $ 4,300 $ 3,100 $ 1,900
Your "cost of gift" $ 5,700 $ 6,900 $ 8,100
*assumes 31% tax bracket and 20% capital gain rate for securities held more than one year

The above examples assume that the donor is entitled to deduct the entire fair market value of the contribution and that the donor's deductions are not limited by the rules applicable to the Alternative Minimum Tax.

Because each taxpayer's situation is different, and because your situation may substantially limit or eliminate your ability to deduct the amount of the contribution, we strongly advise that you contact your accountant or other tax adviser to determine the exact income tax effect of your donation of stock to United Way of Greater Cleveland.

 

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