The Choice of What to Give

Cash: a popular gift

The University of Alabama commonly receives gifts in the form of cash and checks. Cash gifts are convenient for many people and are easily recorded through canceled checks and receipts. Remember, it is important to save all receipts in order to ensure maximum tax savings.

Non-cash gifts: enjoy more savings

University supporters often choose to make their gifts in forms other than cash. Examples include:

• Securities (stocks, bonds, mutual funds)
• Real estate
• Retirement plans
• Life insurance policies
• Other items of value (jewelry, paintings, collections, antiques, automobiles, etc.)

After considering the properties you own, you may find giving something other than cash is an appealing alternative. Giving non-cash property enables you to help UA while conserving cash for other uses and enjoying what may be greater tax savings than those provided by gifts of cash.

When property is worth more

If you have non-cash property, such as stocks and mutual funds, that is worth more than you paid for it (appreciated) and has been held long-term (currently more than one year), you can generally enjoy greater tax savings from giving such property than from giving an equivalent amount of cash. That's because a gift of property that is worth more than it cost lets you bypass capital gains tax that could be due if you sold the asset. You are also entitled to a charitable deduction based on the property's current value, including any "paper profits" you have earned since you have owned it.

Interactive Example

Jordan is in the 33% federal income tax bracket and would like to make a $5,000 gift to The University of Alabama. Should the gift be in the form of cash? Or would it be better to give stocks, bonds, or mutual funds of the same value that are worth more than they originally cost? Jordan is in a 15% capital gain tax bracket.

If the gift is in the form of cash, the deduction for federal income tax purposes would be $5,000, saving $1,650 in taxes. If stock valued at $5,000 that was purchased years ago for $1,000 was given instead, the following would result:

• A charitable income tax deduction for $5,000, saving $1,650 in taxes (just like a cash gift), plus
• Avoidance of capital gains tax on the $4,000 increase in value, a $600 savings (current 15% capital gain tax rate x $4,000)

Note that the after-tax cost of the gift of stock worth $5,000 is just $2,750 ($5,000 - $1,650 - $600). Comparing that to the $3,350 after-tax cost of giving cash ($5,000- $1,650), it is better to give the stock and thus make the same gift to charity at a $600 lower after-tax cost than the same gift made in the form of cash.

Please use the Contact Planned Giving form or e-mail mailbox@advancement.ua.edu for more information about various assets you can give.

Giving property that has declined in value

If you have stock or other investment property that has declined in value, you will normally save more in taxes by selling it and giving the proceeds. You may then be able to claim a capital loss on your tax return. You can also deduct the cash proceeds you give as a charitable gift. In so doing, you may enjoy tax deductions that amount to more than the current value of the asset, while making a meaningful gift to The University of Alabama.