IITBHF and IITBAA (http://www.iitbombay.org)

Benefits of donating appreciated securities
For more information, please visit the Giving to IIT website

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Please consult with your financial and tax advisors regarding your specific situation.

Stock and Appreciated Property

US residents may have tax advantages in donating property that has appreciated in value and has been held long-term.

Here's how it works:

Raj has 200 shares of ABC Corporation stock that he purchased for $30 a share three years ago. The current value of ABC Corp. stock is $50 per share. If Raj sold the stock, he would have a taxable, long-term gain on the transaction that can be calculated in the following manner ($50 minus $30 = $20 capital gain per share. 200 shares X $20 = $4,000 in capital gains).

Raj could sell the stock, pay the capital gains tax and donate the remaining proceeds to IIT Bombay. If, however, Raj donates the stock to IIT Bombay, he would not incur any capital gain and he could deduct the entire current value of the gift (200 shares X $50 = $10,000) as a charitable gift.

Sell Stock and Donate the Proceeds
Raj's Capital Gain (15%)	$4,000
Raj's Capital Gain Tax	$600
Raj's Tax Savings (33% bracket)	$3,102
Actual Gift to IIT Bombay	$9,400

Donate the Stock to IIT Bombay
Raj's Capital Gain (15%)	$0
Raj's Capital Gain Tax	$0
Raj's Tax Savings (33% bracket)	$3,300
Actual Gift to IIT Bombay	$10,000

An income tax deduction is allowed for the full fair market value of the property given. In addition to receiving a charitable deduction for the full fair market value of such a gift, the donor pays no capital gains tax on the appreciation when the gift is made (although the alternative minimum tax implications must be considered). Such a gift is deductible up to 30 percent of a donor's adjusted gross income. Any excess can be carried over for five additional years.

Donors can elect to deduct a gift of long-term appreciated property at the 50 percent ceiling of their adjusted gross income. However, the donor must forgo the appreciation in computing the charitable deduction. In other words, the deduction is limited to the donor's cost basis.

A donor considering a gift of property that has gone down in value would be better off selling the property to realize a deductible loss and then contribute the proceeds to charity and obtain a charitable deduction.

Closely-Held Securities

Usually a gift of closely-held securities, such as one from a family corporation, qualifies for the same advantages (a full deduction, no capital gains tax, and the 30 percent limitation) that are available when marketable securities are given.

An attractive alternative is available to the donor who does not wish to give up control over any part of his or her closely-held stock. This arrangement initially involves an outright gift by the owner of the closely-held stock to IIT Bombay; at a later date the corporation could purchase the stock from IIT Bombay for cash.

As long as IIT Bombay is not obligated to sell the stock to the corporation, the transaction should produce no adverse tax results.

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