This is where some expert assistance could come in handy. When you donate stocks, mutual fund shares or any other security you have held for more than one year, generally you may deduct the current fair market value of the donated securities. Additionally, you avoid paying capital gains taxes on the appreciated value.
So, think about this for just a moment. You get to take the charitable deduction on not only the amount you originally paid for the security, but the appreciated amount. Add to this the benefit of not paying any capital gains taxes on the appreciation. This is one of the few win-win situations for taxpayers. As most of you know, the tax code is all about you lose, the IRS wins.
Let’s look at an example. Say you bought 100 shares of Apple on 1/21/2003 at a closing price of $14.02. You waited a bunch of years and decided to give it away yesterday at a closing price of $192.40. Your charitable donation on Schedule A is in the amount of $19,240.00. That’s right, you paid $1,402.00 and you get to deduct nearly $18,000 more than what you paid. Further, you avoid paying $2,675.70 in capital gains taxes. Is this a great tax provision, or what!