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Tax Tip of the Week
For the week of
November 25, 2002

Donate appreciated property for a double tax break

Did you know you might qualify for a double tax break if you donate appreciated property to charity? Generally you can claim a charitable deduction equal to the fair market value of the property you donate. You might also escape paying capital gains tax on the appreciation in value.

Example. Say you bought 10 shares of ABC corporation at $5 a share three years ago. Today the stock is worth $15 a share. If you donate the shares to charity, you can claim a deduction for the market value of $150 (10 shares at $15), rather than your cost basis of $50. An added benefit: You won't have to pay capital gains tax on the $100 gain.

What property qualifies? The benefits don't apply to all types of property. To qualify, the assets must be eligible for long-term capital gain treatment. If you've held stock for less than a year, your deduction will usually be limited to your cost basis. Business inventory and certain other assets don't qualify either, so check before you make your donation.

Keep good records. Many charities actively solicit property donations, such as stocks, bonds, vehicles, and real estate. They can usually provide you or your broker with the paperwork needed to handle the transaction. In addition to other records, you'll need a written acknowledgment from the charity if your gift is over $250. And you may need an appraisal for items valued at over $5,000.

To get the maximum tax benefit for your contribution, planning and good records are important. If you'd like our assistance, please call us.

Prior Tax TipsClick here to view previous tax tips.

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