Question: A donor has U.S. savings bonds purchased years before and would like to use them to make a charitable gift. Can the donor give the bonds, similar to giving shares of stock, and avoid any tax on the increase in the bonds’ value?
Answer: Treasury rules don’t allow you to transfer the bonds directly to charity. The donor would need to redeem the bonds and pay tax on the interest earned. They can, however, contribute the redemption proceeds and receive a charitable income tax deduction if they itemize. This will reduce or possibly eliminate the tax owed. Depending on the total value of the bonds, the donor might consider a charitable gift that provides them with lifetime payments. In this case, the donor would be entitled to a deduction for a portion of the gift’s value.
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