Donating Securities

December 6, 2012

With year-end approaching, perhaps you are thinking of ways to support the work of HCM International. Many financial experts recommend donating appreciated stocks and other securities (mutual funds, bonds, etc) to tax-exempt organizations like HCMI as a simple way of providing substantial support while getting a double tax-break. When a stock or other security that has grown in value is donated to HCMI, the donor gets to deduct the full market value of the security (on the date of the donation) on his/her tax return and does not have to treat the gain as taxable income. Let's look at an illustration of how this might work.

Tim and Tom are two brothers who each purchase stock in XYZ Co for $2,000. A few years later, the stock has increased in value to $20,000. Both of them decide to make a donation to HCM International.

Tim sells his shares in XYZ for $20,000, realizing a gain of $18,000. Because he is in the 25% tax bracket, he must pay a 15% tax on his gain, or $1,800. After deducting the $1,800, he will have to pay to Uncle Sam, he donates the remaining $18,200 to HCMI. He is able to take an $18,200 itemized deduction on his tax return which saves him $4,550. 

Tom, on the other hand, donates his shares directly to HCM International. HCMI is the beneficiary of the full $20,000! Further, Tom does not have to report a gain on his tax return, so there is no tax due on the transaction. Further, he is permitted to take the full $20,000 as an itemized deduction on his tax return. Assuming he is in the same 25% tax bracket, Tom's itemized deduction saves him $5,000 on his tax return.

Both Tim and Tom made generous donations and HCM International was greatly blessed. However, Tom  was able to donate more to HCMI and also get a larger tax break by simply donating his appreciated securities directly to HCMI. 

For information about your potential tax savings from donating appreciated securities, contact your tax advisor. If you would like to donate appreciated securities to HCMI, it is as simple as directing your broker to transfer the securities to our brokerage account. Please e-mail us at for more information.

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