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Another question about the donation of appreciated property (mainly stock) to charity. A little more detailed information for anybody interested...

additional information on charitable contributions...

Let's walk through some of the basics concerning charitable contributions of
stock or other property.

Contributions of ordinary income property: Property is ordinary income
property if its sale at fair market value (FMV) on the date it was
contributed would have resulted in ordinary income or in short-term capital
gain. Examples of ordinary income property are inventory, works of art
created by the donor, manuscripts prepared by the donor, and capital assets
(such as stock) held one year or less.

The amount of the deduction for the contribution of ordinary income property
is its FMV less the amount that would be ordinary income or short-term
capital gain if you sold the property for its fair market value. Generally
this rule limits the deduction to your basis (or cost, for tax purposes) in
the property.

Example: You donate stock that you held for 5 months to your church. The FMV
of the stock on the day you donate it is $1,000, but you paid only $800 when
you originally purchased it (your basis). Because the $200 of appreciation
would be a short-term capital gain if you sold the stock, your deduction is
limited to $800 (FMV less the appreciation). However, there is an exception
-- you do NOT need to reduce your charitable contribution if you include the
ordinary income in your gross income in the same year as the contribution.

As you can see, the result in the example is generally the same as if the
donor sold the stock for the FMV and contributed the proceeds. However, a
taxpayer who, in the contribution year, has medical expenses of 7.5% of his
adjusted gross income (AGI), or has miscellaneous itemized deductions in
excess of 2% of AGI, or has other deductions subject to an AGI based floor
would be better off contributing the property instead of selling it and
contributing the proceeds, since the gain on a sale would increase his AGI
and thus decrease his medical (or other) deductions. In order to avoid this
problem, try to postpone the stock contribution until the stock is held for
more than one year in order to increase the contribution deduction from the
property's basis to its FMV.

Contributions of Capital Gain Property: Property is capital gain property if
its sale at FMV on the date of the contribution would have resulted in
long-term capital gain. Capital gain property (capital assets) includes most
items of property that you own and use for personal purposes or investment.
Examples of capital assets are stocks, bonds, jewelry, coin or stamp
collections, and cars or furniture used for personal purposes. Capital assets
also include certain real property and depreciable property used in your
trade or business and, generally, held more than one year. (Although you may
have to treat this property as part ordinary income property and part capital
gain property due to depreciation recapture.)

In the case of qualified appreciated stock, you can claim the FMV deduction
up to 50% of gross income. Let's not discuss tangible personal property at
this time, which has other special rules. Let's focus only on qualified
appreciated stock (QAS). QAS means stock of any corporation for which, on the
date of the contribution, market price quotes are readily available on an
established securities market, and that has been held for more than one year.
In addition, shares of open-end mutual fund stock that the mutual fund must
redeem at net asset value upon an investor's demand are also QAS where the
net asset value of the shares is quoted on a daily basis in a newspaper of
general circulation throughout the U.S.

There are some exceptions as to what QAS does not include, but those
exceptions will probably not apply to many of us.

So be charitable, but be tax wise about it.
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