Types of Assets for Charitable Gifts

Cash
Cash, most often in the form of a check, is the most common form of charitable gifts. Cash gifts allow donors to claim a current income tax deduction up to 50 percent of their adjusted gross income in the year of the gift. A gift with a value in excess of this limit may be carried over for up to five additional years. The savings from cash gifts depend on the donor's tax bracket. The higher the tax bracket, the less the cost of the gift.

Appreciated Securities
Gifts of appreciated securities are deductible at their full market value if they are held longer than 12 months. Fair market value is the mean between the high and low trades on the date of the gift. The fair market value of the donated securities can be deducted up to 30 percent of the donor's adjusted gross income with a five year carry over period if necessary.

Donors who contribute long-term appreciated securities to the Foundation get a double federal tax benefit.

Closely Held Stock
Closely held stock are shared in a privately owned business usually held by family members, management and the corporation itself.

Stock can be contributed outright with the donor receiving a deduction for the appraised fair market value. The donor also avoids the potential capital gains tax on any appreciation in the value of the stock.

The donor is entitled to a deduction for the full value of the stock up to 30 percent of the donor's adjusted gross income.

Real Estate
Gifts of real estate include a house or personal residence, farm, vacation home, commercial buildings, and income-producing or non-income producing land.

If held for over a year, gifts of real estate are deductible for up to 30 percent of the donor's adjusted gross income in the year of the gift. Charitable deductions for real estate that is held less than a year is limited to the property's cost basis.

The following guidelines apply to gifts of real estate:
A qualified appraisal of the property must be obtained either by the donor or the Foundation with the understanding that the cost will be paid from the proceeds of the sale of the property.
The Foundation shall determine if the donor has clear title to the property.

An environmental audit shall be performed unless the Foundation decides the requirement can be waived for that particular property.

The Foundation may accept property subject to a mortgage provided the property has sufficient equity, available cash flow to service the mortgage and the property is marketable.

Mortgaged property shall not be accepted for a charitable remainder trust unless the trust would not be disqualified and the income from the property is sufficient to cover all liabilities.

If a donor wants to give real estate and retain income, a "net-income" or "net-income with make-up provisions" is the preferred instrument. Usually real estate will not be accepted for a charitable remainder annuity trust or a charitable gift annuity.

Tangible Personal Property
Gifts of tangible personal property include art, antiques, collectibles, jewelry, rare books, stamp and coin collections, etc. When these items are gifted they are deductible at their full fair market value as determined by a qualified appraisal if the use is related to the tax-exempt purposes of the charity. For example, a gift of art to a museum would be deductible.

If the property contributed is unrelated to the tax-exempt purposes of the charity, the Foundation will sell it and donate the proceeds as the advisor has so chosen. Then the donor is entitled to a charitable deduction for his or her cost basis in the property.

Life Insurance
Gifts of life insurance allow donors to make a future gift to the Foundation at a relatively modest cost. Donors may name the Foundation as the owner and beneficiary of existing policies that they no longer need or name the Foundation as the owner and beneficiary on new policies. Donors are entitled to a federal income tax deduction for the cash surrender value in the year the gift is made.

Mutual Funds
The fair market value of a mutual fund share is its public redemption price on the valuation date. Gifts of mutual funds are deductible at their fair market value up to 30 percent of the donor's adjusted gross income with a five year carry over period.

Qualified Retirement Plan Assets
Retirement plan assets such as IRAs can also make excellent charitable gifts. Qualified retirement plans enjoy favorable tax treatment prior to retirement but are heavily taxed upon the death of the plan holder. Qualified plans may be subject to income tax, estate tax, and an excess accumulation tax, which can total 80 percent or more. In many cases it may be most beneficial to leave other assets to heirs and to name the Foundation as the beneficiary of the retirement plan. Estate tax and income tax can be avoided if the plan participant makes a gift to charity at the time death by beneficiary designation.