In the Market for Gifts of Stock

by Barlow Mann

In spite of a global economic slowdown, Brexit, terrorist attacks at home and abroad, a contentious presidential race and a general atmosphere of uncertainty, the U.S. stock markets reached new highs in August. The Dow, NASDAQ and the S&P 500 set new records this summer.

Before July, the last time the Dow hit a record high was in May of 2015, when the market closed at 18,312. Since then, the Dow has experienced two corrections and high levels of volatility, but still found a path to new closing milestones this summer.

Optimum time for noncash gifts

With household wealth and the stock market at record levels, there may be extraordinary noncash gift planning opportunities for the remainder of the year. In fact, it is likely that an increase in noncash gifts, particularly stock, will help the level of giving from individuals to finally recover to pre-recession highs in real terms in 2016.

The latest Giving USA figures indicate that individual giving for 2015 was still below 2005-2007 levels when adjusted for inflation. Much of the drop in giving during the Great Recession and Financial Crisis was directly attributable to a reduction in noncash gifts by upper-income individuals. In 2016, affluent upper income donors are once again considering the benefits of making gifts of stocks and other appreciated property. These gifts may be deducted at their full fair market value, and the paper profit bypasses capital gains tax.

Tax changes in recent years have increased the maximum income tax and capital gains tax rates on upper-income taxpayers. As a result, their gifts may actually provide greater tax savings than in the past. With talk of tax reform measures in the air, donors may never again enjoy the same level of tax savings.

Taking advantage of the market

Donors considering larger outright gifts, or who have outstanding pledges, may be able to take full advantage of current market conditions and time gifts of highly appreciated stock or other appropriate property in accordance with positive value swings. Additionally, other donors may benefit from funding various life income gifts with highly appreciated, low yielding assets. In both cases, donors should remember that there are limits to the amount that can be deducted in a given year.

While the overall limit for qualified gifts to charity is 50 percent of the taxpayer’s adjusted gross income, the limit for gifts of appreciated property is generally 30 percent. If the property has little appreciation, the taxpayer may elect to deduct their basis subject to the 50 percent limitation. In any event, if the deduction is too large to use in the year of the gift, the excess may be carried forward for use in as many as five future years. As a result, a large gift of securities or certain other appreciated property may actually provide income tax savings in as many as six years.

Gift planners should be prepared to communicate the multiple advantages of gifts of appreciated property to the appropriate prospect and donor pools while market valuations are high. See below for ideas.

Here are some tools that may be useful in soliciting these gifts. First, start with the Sharpe Donor Data Enhancement Services to discover your highest wealth and income segments and the age groups most likely to make gifts of stock.

barlow-mannIn addition to gift planning newsletters, Sharpe has a number of brochures and booklets that you can use at events or in mailings to these donors, including Your Guide to Effective Giving in 2016, Giving Securities and Questions & Answers About Giving Securities.

For training opportunities, click here. Our 2017 schedule will be announced soon. Our team is available to assist our clients with technical and tactical advice. Contact us today at or or call 901.680.5300. ■

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