Securities Case Study
One of the most appreciated gifts to the Foundation is a gift of appreciated stock, as the donor receives a charitable income tax deduction for the full fair market value of the stock. Long-term appreciated stock (or mutual funds) has a fair market value greater than its cost, since it was generally purchased more than 12 months earlier.
If your stock has been held for more than a year but it has decreased in value, it may be more advantageous for you to sell the stock and give cash to the PACA Alumni Foundation.
How to transfer Appreciated Stock:
Stock gifts can be made in several different ways. Due to the Securities Exchange Commision (S.E.C.) regulation requirement for signature(s) to be Medallion guaranteed by an authorized officer of a participating brokerage firm or bank that is registered by the S.E.C., it is suggested that potential donors deliver stocks they may want to donate or sell on short notice to a broker so that stock can be readily moved in street name.
The following methods for transferring, in order of preference, are:
If stock is held in a street account, you may instruct your broker in writing to place the shares into an account in the name of the PACA Alumni Foundation. The broker should be instructed to contact the administrative coordinator named below for instructions on disposal of the shares. A copy of your note to the broker should be sent to the Foundation's finance office (and should include reference to desired use of proceeds, if any.)
If stock certificate is held in the name of the donor, the back of certificate can be endorsed and dated, but NOT assigned to the Foundation. The signature must be Medallion guaranteed by an authorized officer of a participating brokerage firm or a bank that is registered by the S.E.C.
When using the stock power, fill in only the signature(s) and the date at the bottom.
Please deliver or mail the certificate(s) and stock power by certified mail to:
PACA Alumni Foundation
ATTN: Phil Popovich
P.O. Box 4182
San Dimas, CA 91773
If mailed, the certificates and the stock power should be sent separately for security.
The date of the gift will be the day the certificate is delivered to the PACA Alumni Foundation or, if mailed by U.S. mail, the postmark date. When both the certificate and the stock power form are received in our office, a gift will be recorded equal to the average of the high and low market price.
While not the preferred method, if you feel more comfortable sending stock which is made out in the name of the school in the mail, no stock power is required.
If giving Mutual Fund shares, you should work with your broker and the Foundation to have shares reregistered in the PACA Alumni Foundation's name through the Mutual Funds.
Appreciated Stock Case Study
Mr. and Mrs. Jones purchased 1,000 shares of stock for $25 per share that has appreciated to $100 per share over the past several years, for a total value of $100,000. When the Jones’ decide to sell the stock, they find that the long-term capital gain is $75 ($100 minus $25) per share for a total of $75,000. The capital gains tax implication of such a sale is usually 20 percent federal capital gains tax, plus state capital gains tax (which could be 5 to 8 percent), payable on the gain of $75,000.
The Jones’ instead decide to give the stock to the PACA Alumni Foundation. It is important to give the stock and not sell the stock first and give the proceeds. Selling the stock first and giving the proceeds would trigger the capital gains tax. Instead, the Jones’ work with their broker and transfer the stock directly to charity. The result is that all capital gains tax is avoided.
The result of giving appreciated stock is:
The Jones’ receive a charitable deduction equal to the fair market value of the stock, and they also avoid capital gains tax on 100 percent of the appreciation.
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