Outright Gifts
Outright gifts allow you to claim charitable tax deductions for the year in
which they are made to JCSU. Here are some of the ways that you can support the
University with outright gifts.
Gifts of Cash
The most common form of giving, cash gifts, are as easy to make as writing a
check to Johnson C. Smith University. Every dollar you give outright to JCSU is
tax-deductible, and cash gifts are vital, since they are immediately available
to assist deserving students or programs.
Gifts of Securities
Publicly Traded Stocks or Securities
- Gifts of appreciated securities are
tax-deductible at full market value. They also relieve the donor from long-term
capital gains tax on the appreciation. This double tax savings makes it possible
for a significant gift to be made at a remarkably low after-tax cost.
Appreciated securities often represent the most economical way to contribute
during one’s lifetime.
For example: In 1980, you bought stock in company XYZ at a cost of $2,500.
Today, the stock is worth $10,000. You have a long-term capital gain of $7,500.
Assuming a federal capital gains tax rate of 20%, you would owe a tax of $1,500
if you sold the stock. Instead of selling, you contribute the stock to JCSU.
Your $10,000 gift saves $3,100 in income tax (31% x $10,000), plus $1,500 in
capital gains taxes, for a total savings of $4,600. Your total gift of $10,000
was made at an after-tax cost of only $5,200.
The rules for gifting appreciated securities or other property include:
- The full fair-market value of the property, if you have owned it more than one
year, is deductible in the year of the gift.
- If the gift, alone or coupled with other gifts, exceeds 30% of your adjusted
gross income, the excess can be carried over and deducted for up to five
subsequent years.
- You pay no capital gains tax regardless of how much the property has
appreciated in value.
Closely Held Stock - Owners of closely held corporations may donate shares of
their stock to the university, receive a charitable deduction, and retain full
control of their business, all without having to claim a stock dividend.
For example: You own 80% of your corporation and decide to donate a few shares
totaling $10,000 to JCSU. The stock gift still leaves you in full control of
your business, and the charitable deduction saves you $3,100 in income taxes
(assuming a 31% tax bracket). JCSU chooses not to keep the shares and returns
them to your corporation for redemption. Your corporation gives JCSU $10,000 and
retires the stock. As long as the university is not required to turn back its
shares to your corporation, you are not considered to have received a dividend
and do not have to pay any additional tax, even though $10,000 has been removed
from your corporation.
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Gifts of Real Estate and Personal Property
Real Estate: Gifts of appreciated property, such as a farm, personal residence
or undeveloped land, are tax-deductible at full market value, and they relieve
the donor from capital gains tax on the appreciation.
For example: If you own a farm you purchased for $50,000 several years ago and
today its market value is $150,000, you may donate it to JCSU and receive an
income tax charitable deduction for the full appraised value, or $150,000. In
addition, you avoid paying tax on the gain. Your total gift of $150,000 was made
at an after-tax cost of $83,500 (assuming a 31% tax bracket).
If your property has a mortgage, it is still possible to give the property to
JCSU through a gift process, which involves a "bargain sale." You may also
contribute property to the university, receive an immediate income tax
deduction, and still continue to use the property for as long as you wish
through a "life estate."
For example: Suppose you own a piece of real estate valued at $200,000 but you
still have a sizeable mortgage. Since the property has appreciated, selling it
would result in a significant capital gains tax liability. You sell the property
to JCSU at a "bargain sale" price of $150,000, which covers your mortgage and
results in a charitable gift of $50,000. Since you’ve gifted a portion of the
asset, you’ve also eliminated a portion of your capital gains as well as created
an income-tax deduction based on the value of the gift.
The "life estate" allows you to make a gift of property but continue to use it
as long as you desire. Assume you and your spouse are near retirement and pay a
good deal of income tax each year. You own the home in which you live, having
paid off the mortgage several years ago. You plan to live in the home for the
rest of your lives, but you would also like to leave a significant gift to JCSU.
You decide to donate the home, appraised at $150,000, to the university, while
retaining the use of the home for the rest of your lifetimes. Based on your age
and other factors, you receive an immediate income-tax deduction of $25,000, and
you also reduce your estate tax liability.
Personal Property -
Many other types of personal property, including antiques,
artwork, books, collectibles, historical collections, patents and copyrights,
etc., may make excellent charitable gifts to JCSU and generate tax deductions
equal to their full market value. Gifts of personal property of $5,000 or more
require a certified appraisal to establish the value of the gift.
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