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Giving The Illiquid

With the holidays and year-end quickly approaching, now would be a good time to discuss an alternative to a cash charitable donation. While it's certainly worthwhile when you drop your loose change into the Salvation Army kettles, there can be more tax beneficial ways to gift larger amounts.

Have you considered your annual, year-end charitable gift strategy? While it is sometimes tricky to figure out to whom you are going to give - there are so many worthy causes and only so much to go around - also remember to consider what you are going to give to charity. In addition to your time and/or your money, there are other special (yet common) assets to give for a great advantage to everyone involved.

Most seasoned donors are already well acquainted with the fact that there are many great tax advantages to charitable giving. In that spirit, keep in mind that those appreciated securities you have may be the perfect gift to benefit your charities rather than the IRS.

This was the subject of a recent Forbes article titled "Gifting Appreciated Securities: A Win-Win-Win Scenario

Read the original article for details regarding the accounting, securities-talk and the would-be story of our hero, Mr. Benevolent. In essence, however, "appreciated" assets are those that are worth more now than they were when you bought them. In turn, the increase in value represents a net gain - a capital gain - and that can translate into a capital gains tax upon transfer.

In the charitable giving context, you can perform some tax magic. If you sell an appreciated asset, you must first pay the capital gains tax. Thereafter, you may give the after-tax proceeds to charity. You may only claim the value of this after-tax gift for charitable deduction purposes.

On the other hand, if you give the same appreciated asset to charity, then 100% of the value goes to work for the charity. Why? The charity pays no income taxes! Even better, the tax code allows you to claim the full appreciated value when calculating your charitable contribution.

Smart, savvy giving is worth planning - for you and your charities.

For more information, please visit my estate planning website.

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