Appreciated Securities

Gifts of appreciated securities, such as stocks and mutual funds, may offer significant tax advantages to the donor.

Federal income tax charitable deduction

Individuals who donate marketable securities, held for over one year, are entitled to a federal income tax charitable deduction equal to the full fair market value (FMV) of the gift. Although this deduction is subject to an annual limit of 30 percent of your adjusted gross income, you may carry over the remaining unused deduction for up to five years. (The FMV is determined by the averaging of the stock's high and low trading prices on the date of the gift.) If securities have been held for a year or less (short-term), the gift deduction is limited to the securities' cost basis.

Capital gains tax avoidance

For Donors interested in making a charitable contribution, an alternative exists to paying significant capital gains taxes on the sale of assets such as stocks and mutual funds. Individuals making a donation to Providence Hospitals may receive an income tax deduction for the full value of the securities and will avoid capital gains taxes.

Gift and estate taxes

A gift of appreciated securities to Providence Hospitals is not subject to gift or estate taxes.

Gifts of closely held stock

An owner of closely held stock may give the stock to Providence Hospitals and receive important financial benefits. Making a gift of stock will not affect your current income or cash flow.

Giving appreciated securities (owned for more than one year) will avoid the capital gains tax that will incur had the stock been sold. By definition, closely held corporations are corporations whose stock is owned by family members and/or by business associates. The stock is not publicly traded, and in most cases there are restrictions on the transfer of the stock to third parties.

Donors considering a gift of closely held stock must not enter into a prior written agreement with either the closely held corporation or a potential third-party purchaser. The transfer should be an arms-length, independent transaction.

In an outright gift of closely held stock, the donor typically transfers stock to Providence Hospitals. To determine value, the donor has the stock appraised and obtains a charitable income tax deduction equal to the appraised value of the stock. The appraisal must be conducted by an appraiser who is knowledgeable in establishing the value of closely held stock. The Providence Hospitals Foundation may then allow the corporation to redeem the stock, receiving a check for the redemption price.

Donors who wish to make gifts of closely held stock should consult with their attorneys or tax advisors. The Foundation will review all proposed gifts of closely held stock to ensure that acceptance is appropriate.