" The more one gives, the more one has to give . . ."

-Anne Morrow Lindbergh, Gift From the Sea

If you are thinking of making a significant contribution to the hospital (or planning to payoff a Keystone pledge made previously), you may want to consider a gift of stock instead of cash.

In today’s rising stock market, many people find themselves holding stock which is worth much more than the original cost. A sale of the stock would cost the investor a large amount of capital gains tax, even under the new tax cuts. The hospital, however, as a charitable institution, does not pay tax on the sale of stock. The investor can very easily transfer the stock to the hospital; the hospital can then sell the stock and realize the full value without any reduction from taxes. You, the investor, receive an income tax deduction for the full value of the donated stock.

Consider our client who wants to make a $10,000 gift to the hospital. She could write a check, but that would be relatively costly for her to do, even if the payments were spread over several years. We advise her to contribute stock instead to enhance her tax benefit. In reviewing her stock portfolio, we see that she has stock which she acquired many years ago at a cost of $2,000. It has a current market value of $10,000 and it is paying a very low dividend. By donating that stock to the hospital, our client will receive a charitable contribution deduction equal to the full value of the stock , or $10,000. Since our client is in the 36% tax bracket, her tax savings will be approximately $3,600 — nearly double the original cost of the stock!

Meanwhile, the hospital will be able to sell the stock, tax-free and use the full $10,000 to improve the delivery of health care for the benefit of our client, her children and grandchildren. Our client will be making an investment in health care which will provide lasting benefits to her community and future generations, and will be doing so in a way which requires no cash outlay and reaps tax savings for her. She has found an easy, painless and affordable way to make a major contribution.

Gifts of Publicly-Traded Stock

If you wish to make a gift of stock, contact the Development Office at the hospital. They will explain the simple procedure. You may make your gift through the mail (preferably certified) or in person by delivering the unsigned stock certificate and a blank stock power with only the guaranteed signature filled in and mailed separately. You may also make the gift through your broker. You should notify the hospital that you have instructed your broker to transfer stock to the hospital . Include the name of the stock and the number of shares you authorized, along with name and phone number of your broker.

The value of your gift is the mean of the high and low trading price on the day your transfer to the hospital is complete. This is your tax deductible donation.

Note: The above discussion applies to stock held for more than one year. Special rules apply to stock held short-term. If your stock has declined, and you can take a deduction for the capital loss; it would probably be to your advantage to sell the stock first and then donate the proceeds. There is a deduction limitation of 30% of adjusted gross income (AGI) for long-term appreciated property. For example, if your AGI is $35,000, your charitable deduction for the stock gift would be limited to $10,500. We recommend you consult your CPA, financial advisor or attorney for specific legal or tax advice.

Gifts of Closely-Held Stock - Sale to ESOP

If you own stock in your own business or a privately-held company, you may find that while you’d like to make a gift to charity, everything you have is "tied up in the company." A gift of closely-held stock can provide a solution, benefit the hospital and produce a charitable tax deduction.

If the privately held company also has an ESOP (employee stock ownership plan), a gift of your closely-held stock is even more attractive because there is a ready market for the hospital to sell the stock.

When a successful business owner of a closely-held company wants to make a sizeable donation to the hospital, she may sell stock in her company, pay taxes on the sale and give the remainder to the hospital. The $100,000 in stock might only produce a gift of $75,000, after taxes. The hospital would be greatly benefitted by receiving the closely-held stock, particularly if there will subsequently be an opportunity for the hospital to sell the stock to the company’s ESOP or another buyer.

The stockholder can transfer the stock to the hospital and receive a charitable deduction for the full appraised value of the stock. The hospital in turn can sell the stock to the ESOP. Alternatively, the stockholder may sell directly to the ESOP, buy qualifying public securities and give those to the hospital.

A charitable gift of closely-held stock can also be a great estate planning tool as it can be used to reduce estate tax and the business owner’s heirs might buy back the stock at a future date.

Of course, there are caveats to all of this. The hospital cannot be legally obligated to sell the stock. Additionally, with closely-held stock, certain appraisal requirements must be met. Anyone considering such a gift should seek the advice of a qualified professional to assure that this type of gift fits their individual circumstances. A gift of stock in a closely-held company can provide excellent opportunities for both the business owner/investor and the hospital to unlock the value which was "all tied up in the company."

In a recent survey, individuals over 95 were asked what they would do differently if they could live life over. One of the most frequent responses was they would invest more time and resources in things that will last beyond their lifetimes. Most of us want to assure that the institutions we value continue to be supported during our lives and long after we are gone. A gift of publicly-traded or closely-held stock is a great way to create that legacy, while at the same time generating present tax savings.

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