q&a Andrew Leckey

October 19, 2008|By Andrew Leckey

Q: What kind of deduction can you take for donating stock to a charity?

- M.I., via the Internet

A: If the stock has increased in value since you bought it, you can avoid paying capital gains tax by donating it.

If the security is being donated to a charitable organization, the total amount will still be eligible for a tax deduction based on the fair market value of the stock.

"There's an advantage to donating stock instead of cash so long as it is a stock you've owned for a year or more and you have a gain," said Mike Busch of Vogel Financial Advisors. "You basically get a tax deduction for the fair market value of the stock, as opposed what you paid for it, and you escape taxation on the gain."

Let's say you bought a stock for $1,000 and it is now worth $2,000. You donate it, get a $2,000 deduction and don't have to recognize the $1,000 gain on your tax return.

"However, if you had a loss, you would want to sell the stock first and donate the proceeds because you want to take the loss on your tax return," Busch said.

E-mail Andrew Leckey at yourmoney@tribune.com.

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