There are very favorable tax rules for donors who want to donate long-term stock (stock they have owned for more than one year) that has appreciated in value. Basically, the donor never has to pay capital gains on the appreciated stock. This can be a tremendous tax benefit and great incentive for donors to give stock to nonprofits.

Here's how it works: If someone owns stock for more than one year that has gone up in value, that person can donate the stock to Kids, Incorporated, get a deduction equal to the fair market value of the stock at the time of the transfer (its increased value), and never pay capital gains tax on the appreciated value of the stock. Kids, Incorporated will never owe that capital gains tax either. Kids, Incorporated can take the stock and either sell it right away and not pay any tax, or we can hold on to it—but Kids, Incorporated will never owe capital gains tax on the appreciated value the donor realized.

Example: Sam owns 1,000 shares of Evergreen stock, which is traded on the New York Stock Exchange. He paid $1,000 for the shares back in 2005 and they are worth $10,000 today. He gives the stock to Kids, Incorporated and deducts its $10,000 fair market value as a charitable contribution. Sam need not pay the 15% capital gains tax on the $9,000 gain in the value of his stock. Kids, Incorporated sells the stock and pays no taxes on the $10,000 it receives. Had Sam sold the stock he would have had to pay a $1,350 long-term capital gains tax on his $9,000 profit (15% x $9,000 = $1,350). This would have left him only $8,650 from the stock sale to donate to nonprofit.

This is a hypothetical example. Please check with your tax advisor to make sure the stock donation is favorable for you.

Kids, Incorporated is recognized by the Internal Revenue Service as a 501(c)(3) nonprofit charitable organization. All gifts are tax-deductible to the fullest extent of the law. Thank you for providing opportunities for children and families in our community!