Jack and Jill Jones found that they had been fortunate (or wise) in purchasing shares of Apple, the computer and cell phone company. In less than 4 years, their 12 shares had nearly doubled in market price, from $75.67 to over $150 per share. By late August 2017, in the midst of this blessing, the Jones found themselves less comfortable with the ups and downs of the market. They decided to sell the stock and direct their investing into more stable securities, instead.
Selling and reinvesting was not so simple; there would be taxes to pay. The Jones thought that perhaps after selling the stock they could give the proceeds to charity, like the Covenant Fund at the Church. Then the charitable tax deduction would help to offset the added taxes.
Their tax advisor suggested an alternative; transferring the stock directly to the Church. They learned of significant benefits in doing that.
- First, they would receive a charitable tax deduction for the full Fair Market Value (FMV) of the stock;
- Second, they would have no Federal taxes to pay on long-term gains;
- Finally, the Church would receive all of the value of the stock transferred to it, not the smaller amount remaining after-taxes.
Shown below is a display of different impacts from the Jones’ choices between cash, selling the stock to give cash, or transferring the stock.