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How to Run with the Bulls...then Avoid Taxes like a Matador

A tax-wise approach to giving

For those who have invested in the stock market or in mutual funds, the past several years have been a heady -- and profitable -- time indeed. And, since many savvy investors have had a sustained run, albeit along Wall Street instead of through the streets of Pamplona, the time has come to think about the tax implications of your success.

Unlike a run with the bulls in Spain, the route to giving a gift of appreciated stock to the University has few twists and turns (and absolutely no painful encounters!). If the gift comes to Penn as a simple transfer of ownership, the donor will receive a tax deduction for the full market value of the stock.
securities chart
For example, consider the case of Joe and Ivy Quaker. Several years ago, the Quakers bought $3,000 worth of stock in an emerging biotechnology firm. As the bull market persisted and the company prospered, the Quakers' stock appreciated to its current market value of $10,000. Since this was not the only investment Joe and Ivy made over the years, it was now time to give serious consideration to the tax implications of their investments. When they spoke to their broker they learned the following: if they sold their stock, the capital gains tax bite would be 20 percent, which amounts to $1,400.

Their broker offered another suggestion -- the Quakers could make a charitable donation and, like the seasoned matador, sidestep the pain of a capital gains tax altogether. Joe and Ivy, who had often discussed a gift to their alma mater, agreed; the time was right for their gift to the School of Arts and Sciences. It couldn't be easier, their broker explained; they would simply transfer the ownership of the stock to the University as a gift. They would then receive a charitable tax deduction of $10,000 without having to report any gain whatsoever.

Securities may be transferred in several ways:

  • Send the unendorsed stock or bond certificate by registered mail to Maria Klekotka, University of Pennsylvania, 426 Franklin Building, Philadelphia, PA 19104-6205. On the same day, but under separate cover, mail the executed stock power.

  • Have your broker contact Maria Klekotka, Office of the Treasurer, at (215) 898-7254 to advise her of your gift. Maria will discuss the gift with your broker in order to complete the transaction and make arrangements for disposition of the securities.

  • Matching gifts: You can double your gift if you are affiliated with a company that has a matching gift program. Obtain a matching gift form from your personnel office and include the completed form with your gift.

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