In the process of donating more than $1.5 billion to charitable causes over the past five years alone, investor and philanthropist George Soros has surely paid more attention than the average donor to the details of his gifts -- not just to choosing the recipients but to maximizing the tax benefits of his largess. Even at far more modest levels, the more you can make Uncle Sam a partner in your generosity, the more generous you can afford to be.
Giving away assets that have soared in value has the advantage of letting you shed your tax bill as you play benefactor. If you have owned an asset for more than a year, you can deduct its full market value without ever reporting any appreciation as taxable income.Transferring stock to a charity is easy. If you hold the stock certificates, you'll need to sign them over. Otherwise, "all you need to do is tell your broker the number of shares you want to transfer and give him the number of our brokerage house," says Barbara Boyts, director of major gifts for the Alzheimer's Association. "It takes about 24 hours."
In its acknowledgment, the Alzheimer's Association shows the amount of the gift, based on the value of the stock on the day of the transaction. If a charity doesn't provide the value, you should keep the newspaper stock listings for the day of the transfer for reference.
Most charities will also accept mutual-fund shares, but to do so, the charity must open an account with the fund. Once it's open, you direct the fund to transfer your shares to the charity's account.
If you're giving away only part of your account, be sure to instruct the fund to transfer the shares for which you paid the least. That gives your gift the biggest tax-saving punch because the lowest-basis shares have accumulated the most capital gains.
Though this might sound like a strategy for the very wealthy, the rest of us can benefit from it, too. A $1,000 cash gift will cut your tax bill by $280 if you're in the 28 percent bracket. Making the same gift with $1,000 worth of mutual-fund shares that include $400 of long-term gain will save you the same $280 plus an extra $80 in capital-gains taxes.
Not a bad return for a couple of phone calls.