Appreciated Securities

Enhance your giving using appreciated securities

The IRS still allows a notable tax break for individuals considering a charitable gift: Donors may deduct the full, fair market value of long-term appreciated assets given to Mercy Ships, with no recognition of capital gains. That means that donors can leverage a large donation and charitable deduction using an asset with a small cost basis.

How it works

A supporter holds publicly traded appreciated stock, which he has held for more than one year, with a fair market value of $10,000, which he bought for $5,000. If he contributes the stock to Mercy Ships, he will be able to claim a charitable income tax deduction for the full $10,000. In addition, he will not be liable for tax on the $5,000 capital gains upon the transfer of his stock. By using stock instead of cash, he has delivered $10,000 to Mercy Ships and secured a tax deduction in the same amount, at a cost to him of only $5,000.

[Note for discussion:  The original cost was $ 5,000, assuming a 15% capital gain tax rate, the gift would only have an after-tax cost to the potential donor $ 3,500 (($ 5,000 original cost minus the capital gain tax ($10,000 X 15%)].

Don't sell the stock first

Even though you give us the proceeds as a gift, the IRS will impose capital gains tax on your sale, wiping out the benefits of this arrangement.

Don't contribute stock that has declined in value

First, the fair-market deduction rule works against you: if you bought stock for $50,000 and it's now worth $30,000, your charitable deduction will be limited to $30,000. Second, you won't earn a capital loss by making the transfer to us, either. It is better to sell depreciated stock, claim the resulting tax loss as one deduction, then make a deductible cash gift to Mercy Ships with the proceeds.

Here's how to transfer securities: Have your broker contact Neva Sperr to arrange the transfer to Mercy Ships’ account. Your charitable deduction will be valued as of the date the securities reach our account. If you hold the shares yourself, mail them, and, in a separate mailing envelope, send a blank stock powers (except for signature and date), to:

Neva Sperr
Accounting Operations Manager
Mercy Ships
P.O. Box 2020
Lindale, TX  75771-2020
903-939-7180
903-939-7109 (fax)

Your charitable deduction will be valued as of the postmark date on your envelope transmitting the securities.

Donors may deduct gifts of appreciated assets up to 30 percent of their adjusted gross income (the total of their taxable income). Thus, a donor whose adjusted gross income will be $100,000 this year will be able to deduct up to $30,000 in gifts of stock. A gift in excess of the 30 percent amount is not wasted, however, because the IRS allows donors to carry forward excess deductions through the five tax years following the year of the gift.

Before doing anything

Please have your broker or account representative contact Neva Sperr before you make your transfer.  We want to make the gift experience as smooth and seamless as possible.  As always, consult with your financial advisor before initiating any charitable gift arrangement.