Appreciated Assets

Donating long-term appreciated assets directly to the Federation – rather than selling the assets and then donating the cash proceeds – is one of the easiest and most tax-efficient ways for you to give. 

You may significantly increase the amount of your gift to the Federation by taking advantage of applicable tax benefits. As a general rule, you can deduct the fair market value of the asset as an income tax deduction and avoid paying capital gains tax (subject to IRS deductibility rules as income tax deductions for gifts of appreciated property are limited to 30% of your adjusted gross income, but the excess may be carried forward for five years). 

Publicly Traded, Marketable Securities

Outright gifts of publicly traded, marketable securities are quick, easy and quite popular. Marketable securities include stocks, bonds, and mutual funds. Using stock as the funding asset for your philanthropy is an excellent way to make charitable contributions. Here are some tips on how best to use stock as a charitable gift:

  • Donate long-term appreciated stock, that is held for more than one year, and you may deduct its fair market value. Because it is a gift and not a sale, you avoid paying capital gains tax. (For stock that has been held less than one year, you can only deduct your adjusted cost basis, and therefore, it may be advantageous to contribute a different asset).
  • Consider choosing appreciated stock with the greatest capital gain to take maximum advantage of this tax savings.
  • Appreciated stock may be used to make outright charitable gifts or to fund life income gifts, such as charitable gift annuities and charitable remainder trusts. In these situations, you get a current income tax deduction, do not trigger capital gains tax recognition, and enjoy the benefit of an income stream from the annuity or trust for yourself and/or a loved one.

Closely Held and Restricted Stock

Gifts of closely held and restricted stock are particularly relevant for many of our supporters here in the Bay Area. The unique advantage of these gifts is that, after the gift has been made, the corporation may buy back the stock and retire it, so long as there is no prearranged sale. Because you would owe no capital gains tax, the greater the amount of accumulated profits the greater the tax advantages of this type of gift. Because of the unique circumstances associated with each gift of closely held or restricted stock, plan for additional due diligence to be completed by the Federation in order to review and accept the gift.

Real Property

Gifts of real property may take several forms. In addition to outright gifts of real estate, real property may be used to fund charitable remainder unitrusts. All gifts of real estate require due diligence review by the Federation before acceptance.

Gift of a Remainder Interest in a Personal Residence – "Retained Life Estate"

With a retained life estate, you retain the right to use the property for the duration of your lifetime, and then the property passes to the Jewish Community Federation. You get an upfront income tax deduction equal to the present value of the future remainder interest without the expenditure of any cash or the reduction of income. In addition to the due diligence review of the property by the Federation, you will remain responsible for:

  • Property maintenance and upkeep;
  • Payment of property taxes;
  • Payment of insurance on the property equal to its current value throughout your lifetime.

Gift of a Fractional Interest in Real Estate

With a fractional interest in property, you transfer ownership of the interest, typically a percentage, to the Federation. The transfer of ownership, which makes it a "completed gift" for tax purposes, must be completed prior to entering into a contract for the sale of the property. You will be eligible for an income tax deduction and capital gains tax savings related to the fair market value of the interest transferred. Upon sale of the property, the Federation receives its share of the proceeds to further your charitable goals.

Bargain Sale – "Part Gift/Part Sale"

With a bargain sale, you sell the property to the Federation for less than the market value of the property, resulting in a transaction that is "Part Gift/Part Sale." You will be eligible for an income tax deduction and capital gains tax savings for the "gift" portion of the transaction. As with other gifts of real estate, the Federation will work with you to complete the due diligence review before gift acceptance.

Life insurance

There are two ways to make a gift using life insurance. You may donate a paid-up policy with cash surrender value, from which you no longer need the benefits. You will be eligible for an income tax deduction for the value of the gift. The Federation liquidates the policy once it becomes policy owner, and the proceeds are used to further your charitable goals. Or, you may designate the Jewish Community Federation as the primary or contingent beneficiary of an existing or new policy. The gift will be realized and fulfill your legacy gift upon the death of the insured.

 

For more information, please contact:
Sindy L. Craig
Senior Director of Planned Giving and Endowments
415.512.6232