How to Give Transfer Stocks
Giving stocks to charities offers a powerful way to donate to causes that are important to you while enjoying considerable tax advantages. This is especially useful if the recipient of the stock is in a low income tax bracket, that is, in the 15 percent bracket or lower. Moreover, by transferring the stock, avoid the capital gains tax that would result if you sold the stock and then gave that person the proceeds. Consequently, transferring the stock can be more efficient than giving the same in cash derived from the stock.
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Instructions
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Compute how long you have held the stock. In order to be eligible for the lower capital gains tax rate, the stock must have been held longer than one year. This one-year period can be achieved with a combination of the time the stock was held by the donor and the recipient. Brokerage account records should include the date of the purchase by the donor.
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Compute the appreciation on the stock. The appreciation of the stock is income. Consequently, when it is sold, income tax obligations can result. By transferring the stock to the recipient, it may be at the 5 percent or lower rate (assuming the recipient has low income). The appreciation is the difference in the market value of the stock when it was sold and the price paid for the stock originally.
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Determine if lower capital gains taxes apply. The tax obligation on the sale varies with the income of the recipient. Therefore, one should use a 1040 form and related schedules to determine the recipient's taxable income. Only when the recipient is in the 15 percent bracket or lower is the lower capital gains tax possible.
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Complete forms from the owner's brokerage firm and create an account for the recipient. The owner's brokerage account will have forms for completion that seek information regarding the stock and the new account to which it will be transferred. It also will require signatures to ensure that the deal is legitimate. If the recipient does not already have a brokerage account, this can be done with basic paperwork from any number of possible brokerage firms.
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Tips & Warnings
A financial adviser should be consulted to make sure that the transfer fits within an overall financial management plan.
