The Advantage of Giving Securities

Why does giving securities often make more sense than giving cash?

If you own securities, such as stocks, bonds, or mutual fund shares, it could be to your advantage to give the securities instead of cash to the Lausanne Movement. This is only true for appreciated securities—those which have gone up in value since your purchase.

The best way to explain this is by example. Assume you own stock with a current value of $10,000; you’ve held the stock for at least 12 months; and your purchase price for the stock was only $3,000.

If you give that stock to Lausanne, you would receive a charitable deduction for the full $10,000. If you happen to be in the 35% income tax bracket, that will give you a tax savings of $3,500.

In addition, you avoid paying the capital gains tax you would have owed had you sold the stock instead of giving it. Capital gains tax is applied to the increase in value from the time you acquired until the time you sell. In our example, capital gains would be $7,000 ($10,000 minus $3,000). Therefore, if you are in the 20% capital gains tax bracket, you avoid additional taxes of $1,400 (20% of $7,000).

If you sell the stock, you would receive only $8,600 after paying capital gains tax. By giving the stock to Lausanne, you avoid $1,400 of capital gains tax and you receive a tax deduction of $3,500. But Lausanne gets the full value of the $10,000 gift to use in our ministry of connecting influencers and ideas for global mission.

Your situation will be different, of course, but as long as the value of the security when given is greater than its value when purchased, the cost of the gift to you will be less than its value to Lausanne. Always check with your tax adviser before transferring securities.

What if I like this stock and want to keep it?

It can still be to your advantage to give it to Lausanne. Here’s why. Continuing with the example above, in the future, if you ever decide to sell the stock, you’ll have a cost basis of only $3,000. You’ll have to pay capital gains tax on the difference in value at the time you sell it. If the value keeps increasing, that could be substantial.

But if you give the stock to Lausanne, you can buy it in the market on the same day for virtually the same price. In our example, this increases your cost basis to $10,000. Now, should you decide to sell the stock in the future, your capital gains will have been reduced by $7,000, saving you $1,400 in capital gains tax if you are in the 20% capital gains tax bracket at the time you sell.

To begin the process of making a stock or other appreciated securities gift to the Lausanne Movement, please contact Lawrence Russell, Chief Operating Officer, for information that will help you make a smooth transfer of your gift. He can be reached at +1-303-725-8208 or [email protected]