Consider these two scenarios and tell us which is wisest.
(A) The giver donates an appreciated non-cash asset before the sale, thereby taking a $500,000 income tax deduction and receiving a $205,000 reduction in taxes.
(B) The giver sells an appreciated asset first, and then gifts the proceeds to us, thereby taking a $405,500 income tax deduction and receiving a $166,255 reduction in taxes.
| Scenario | Gift to charity | Gift to gov’t * | Income tax deduction | Value of charitable income tax deduction at 41% | Out-of-pocket cost to make the gift |
| A. Gift asset before sale | $500,000 | $0 | $500,000 | $205,000 | $295,000 |
| B. Sell asset, then gift proceeds | $405,500 | $94,500 | $405,500 | $166,255 | $333,745 |
| *Assumptions: 35% Federal, 6% State tax rates, $50,000 asset basis, $500,000 fair market value (FMV), donor held asset over one year and gives 100% of interest | |||||
Which is best?
Obviously scenario A is far better for the donor and the charity, only the government loses!
So how can we serve you? The Idlewild Foundation would be honored to explore how we can help you give in new, creative, and tax-smart ways. Please call us at (813) 264-8713 today to learn more.
Reprinted with permission from National Christian Foundation, Copyright 2011