Conservation Corner: December 20, 1999

Consider Appreciated Assets When Making Donations
by James L. Cummins

Are you considering a gift to the Mississippi Fish and Wildlife Foundation? If so, think about how your gift can benefit you as well. The truth is, wrinkles in Uncle Sam's tax code mean that not all gifts are created equal. Here are some tips that Laura Saunders, a Senior Editor of Forbes Magazine, has provided Wildlife Mississippi.

According to Saunders, "If you want to make a gift during your lifetime, consider donating appreciated assets, such as stock, land or part of a house that have significantly increased in value since the time you purchased the asset. In fact, you might want to consider giving it before you give cash." To see why, Forbes's Senior Editor has provided the Foundation a comparison of the tax benefits for several different types of gifts worth $100.

If you write a $100 check to a charity, you get a tax deduction for $100.

Saunders states that if you sell a share of stock worth $100 today that you bought years ago for $20, you will owe as much as $16 of capital gains tax on the sale. You could then donate the remaining $84 to charity and get a tax deduction of $84.

However, if you choose, you can also donate the share of stock worth $100 to the charity. In this case, Congress has decided that you get the full $100 deduction for the gift, even though the stock is worth only $84 to you after-tax.

Saunders tells us that almost any asset can be donated. It's easy to give away shares of publicly traded stocks. In fact, all you need to do is call your broker and inform him or her that you want to donate the stock and where it should go.

On the other hand, if you want to leave a legacy of death, experts say that the most "tax efficient" way to do it is with an Individual Retirement Account (IRA). Many people now have very large IRAs, thanks to rollovers from pension plans and the long bull market. Yet all IRA assets are subject to income taxes at death, or shortly afterwards, and, if the estate is taxable, to estate taxes too. This means that IRAs face taxes as high as 70%. Yet, if the IRA goes to charity, the tax isn't owed.

IRA owners can subdivide their accounts. So if a taxpayer had a $500,000 IRA, he or she could split off, say, $10,000 of it into a separate account that names the Foundation as the beneficiary. And mandatory distributions for those over 70 ½ can come from any 'pot'. So if a withdrawal of $25,000 from the total IRAs listed above is needed, it could all come from the $490,000 'pot'.

The rules about charitable giving can be tricky. If you want to make a large gift to the Foundation, run it by a tax expert or a Certified Public Accountant (CPA) who can help you to do good and do well at the same time.

James L. Cummins is Executive Director of the Mississippi Fish and Wildlife Foundation in Stoneville, Mississippi. Known as "Wildlife Mississippi," the Foundation is a non-profit, conservation organization founded to conserve, restore and enhance fish, wildlife and plant resources throughout Mississippi.