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Gift of Appreciated Assets

 

Gifts of appreciated assets are attractive for many Millsaps alumni and friends. First, this type of gift allows them to make a larger gift than what the asset actually cost. For example a stock which cost $1,000 and which has appreciated to $5,000 enables the donor to make a $5,000 gift with an asset that only cost them $1,000. Second, the after tax cost of this kind of gift is actually lower than the after tax cost of selling the asset and giving the proceeds. Consider the following example: Bob and Jan own $10,000 worth of stock that they purchased nine years ago for $3,000. They are considering selling the stock to make a $10,000 gift to Millsaps. They are in the 28% income tax bracket.

 

Sell/Gift Proceeds

Stock Gift

Gift amount

$10,000

$10,000

Cost basis

$  3,000

$  3,000

Capital gain

$  7,000

$         0

Capital gains tax (20%)

$  1,400

$         0

Income tax deduction

$10,000

$10,000

Tax savings at 28%

$  2,800

$  2,800

Net tax savings

$  1,400

$  2,800

After-tax cost of gift

$  8,600

$  7,200

     

Deductions for gifts of appreciated assets are limited to 30% of your adjusted gross income. However any unused portion of your deduction may be carried forward up to an additional five years. This will usually enable you to enjoy the full amount of your deduction.

How do I go about making a gift like this?
Before making a gift of an appreciated asset, please call us first. While we can and do accept gifts of many types, there are a few that can pose special consideration such as real estate and mineral or timber interests. The most typical asset used for this kind of gift is marketable stocks and bonds. After you have contacted us about your gift intention, we will determine the most effective way to transfer your assets to Millsaps. For securities, this may be stock power, or by transferring the securities to one of our brokerage accounts. We can often save you sales commissions by handling the transaction through one of our broker relationships. Deeds transferring real estate will have to be prepared by our attorneys - subject to our acceptance policies regarding real property. Other assets will be handled on a case by case basis.

What about appraisals?
To satisfy IRS requirements, you are required to have an independent appraisal of any asset that does not have a readily available market value such as stock. In some cases Millsaps will also obtain an appraisal, however it is important that you have your own appraisal to substantiate your charitable deduction and to include with your tax return.

For more information contact:
Gift and Estate Planning Services
Millsaps College
P.O. Box 151191
Jackson, MS 39210-1191
(voice) 601-974-1035  (fax) 601-974-1088

DISCLAIMER: The information contained on this page is for educational purposes only.  The reader understands that Millsaps College is not rendering legal advice and that the reader should seek independent legal counsel when contemplating estate planning decisions.