Cash, Check Aren’t Best Ways To Give To Charity

Whenever you’re planning to make a contribution to charity, don’t think only in terms of cash or a check.

In these days of sophisticated tax planning, there may be another way with appealing possibilities - maybe involving an investment or an insurance policy you own, or even through a credit card account.

Thanks to the 1990s bull market, many investors have accumulated big paper profits on their holdings.

If you sell to cash in, the capital gains you realize become an instant tax problem. But you could choose to give the profitable security holding directly to a charity.

“By giving appreciated assets, including company stock, to charity, you usually can avoid reporting the unrealized gain as income, and you may be entitled to a deduction equal to the asset’s fair market value,” notes the accounting firm of KPMG Peat Marwick.

For example, suppose that you own $2,000 worth of Hypothetical Fund shares that cost you $1,200 when you bought them two years ago.

If you sell them now, and then contribute the proceeds to charity, you will have an $800 taxable gain, and a $2,000 charitable deduction. But if you give the shares directly to a charity, you can nail down the deduction without realizing the gain.