Neutralize Capital Gains Taxes on Appreciated Stocks or Bonds

When you make a gift of appreciated stocks or bonds, you receive a tax deduction for the full, current market value for your gift on the date it is transferred to the ESU, and you pay no capital gains tax on the appreciated value of the assets. For example:

John D. wishes to make a gift of $25,000 to the ESU. Rather than making the gift in cash, John wishes to make the gift from 1000 shares of XYZ Corporation that he bought some years ago for $5 per share, which are now worth $25 per share.

If John sells the shares prior to making his gift he will pay capital gains tax on $20,000 - the difference between his cost basis of $5,000 and the sale price of $25,000. Since John's tax bracket is above 25 percent, his capital gains rate is 15 percent, and his capital gains tax will be $3,000. Thus John will have $22,000 in proceeds from the sale and he must add $3,000 in cash to reach the $25,000 gift total.

If John were to give the XYZ Corporation shares to the ESU as a gift, he would pay no capital gains taxes, and he would receive tax deduction credit for the full $25,000 market value of the gift.

 

If you wish to make a gift of appreciated stocks or bonds, please contact us at 212-818-1200 with any questions.