During a routine check-in meeting, your client casually mentions that the client’s employer, a local company, was just acquired. The client and dozens of fellow employee shareholders are now flush with cash.

“I’d like to use some of the money to give to charity,” the client tells you. “Let’s talk about a family fund at the Community Foundation.”

You know that your client could have avoided the capital gains taxes if they had given some of those shares to a fund at the Community Foundation years ago when the company was growing fast, making it a natural target for acquisition or IPO, but well before an exit was in the works. This situation can be all too common, but it presents a  good reason to regularly remind clients about their options for making gifts to charity and the tax benefits of each. Here’s how you can still help.

You can help your client establish a Donor Advised, Field of Interest, unrestricted, or other type of fund at CFAAC to fulfill their charitable intentions. Your client’s gifts to the fund qualify for a charitable tax deduction in the current tax year, helping to offset the income from the sale of the shares.

Giving cash to a public charity, which is what your client in this situation will be doing, is always a viable option. The general rule is that your client can deduct cash gifts to up to 60% of their adjusted gross income (AGI) in any given year. While this may not completely offset large gains from the sale of the stock, it will help to reduce the client’s taxable income.

Giving appreciated stock is a very tax-effective method of supporting public charities. Clients who donate stock outright avoid all capital gains tax that would be levied on a sale of the stock if it were sold prior to making the donation. Even with the 30% of AGI limitation imposed on gifts of highly-appreciated, long-term capital gains property to a public charity, your client likely will still come out ahead because the client’s AGI is presumably a lot lower than it will be in the year of a future stock sale. Let us know how we can help. Contact CFAAC at info@cfaac.org or 410.280.1102.