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by John W. Mee, Jr., Esq. - Copyright 2004
1. The Potential for a Tax Wise Charitable Gift in 2004
If you are like many Oklahomans,
your income tax on long term capital
gains is 22%. (Typically 15% Federal and 7% Oklahoma.) Did you
know you may be able to save that 22% tax on your 2004 gift to
Central Oklahoma Habitat for Humanity (“COHFH”) by using shares
of stock for the gift?
You will receive the same 2004 income tax charitable deduction
whether you make your gift with cash or stock. But you may
achieve significant additional income tax savings by making your
gift with stock. The requirements are that the stock must be
publicly traded, must have appreciated and must have been held
long term (a year and a day, or more).
For example, assume you are planning to make a 2004 gift to
COHFH in the amount of $10,000, and would normally make that
gift in cash. Further assume you own 100 shares of stock in XYZ
Corporation that has a tax basis (original cost) of $1,000 and a
current market value $10,000. The tax-wise alternative for you
may be to give the 100 shares of stock to COHFH, instead of the
$10,000 cash. These are the potential savings:
|
Tax Benefit to Donor |
Gift of Cash |
Gift of XYZ Stock |
|
Charitable deduction on $10,000 gift, assuming 35%* combined
Federal and State ordinary income tax rate:
|
$3,500 |
$3,500 |
|
22% Capital gains tax saved on $9,000 capital gain.
($10,000 value less $1,000 basis): |
N/A |
$1,980 |
|
Donor’s total tax savings on $10,000 gift in 2004: |
$3,500 |
$5,480
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*Assumes
donor is at 28% Federal and 7% Oklahoma income tax bracket.
2. How Do You Make a Gift of Publicly Traded Stock to
COHFH?
COHFH’s staff is familiar with the simple mechanics required,
and is ready to help you. Just call COHFH at (405) 232-4828
and ask for President Ann Felton or Planned Giving Administrator
Pam Felactu. (Ann knows how to do this because she personally
made a gift of stock to COHFH in 2003!)
There are several ways the transfer of stock to COHFH can be
accomplished. Two of the more common examples are:
a. If you hold the actual stock certificates, COHFH will
make an appointment for you with a broker at an office of
COHFH’s securities firm. That appointment can be in Oklahoma
City, or it can be at some other office of the securities firm
more convenient to you. The paper work is minimal, and the
securities firm will provide what is necessary.
b. If you hold the stock in an electronic account, the
transfer is started by you simply giving your broker written
instructions to transfer the shares to COHFH’s account at
COHFH’s securities firm.
3.
Plan Ahead to Insure Your Deduction is in 2004
It is wise to plan your stock gift
transaction well ahead because the exact amount of time required
for the transfer is not always predictable. (Don’t wait until
the last few days of the year!)
The general rule is that a gift of
stock is effective for income tax purposes on the date COHFH
receives physical custody of the properly endorsed or assigned
stock certificates, or has the electronic transfers actually
reflected in COHFH’s brokerage account records.
4. Check with Your Own Tax and
Legal Advisors First
It is necessary for you to consult
with your own tax and legal advisors in advance of making a gift
of appreciated, publicly traded stock to COHFH. That is because
the information in this article is by necessity general in
nature, and may not apply to your specific fact situation.
About the Author
Mr. Mee holds
business and law degrees from O.U. He also holds a Master of
Laws in Taxation from N.Y.U. Mr. Mee is a Fellow of the
American College of Trust and Estate Counsel. His office is at
50 Penn Place in Oklahoma City. He may be contacted at
848-9100, or
jwmjr@meehoge.com. This Article is for general
information purposes only. It is not legal advice by Mr. Mee or
Mee, Mee & Hoge, PLLP.
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