Market Volatility Calls for Long-Term Approach to Donating Securities

Donors waiting for just the right time to contribute their stocks to charity will be waiting a long time and instead should focus on a longer-term “investor” approach to giving.

According to information provided by Price Waterhouse and published in an article from the Association of Fundraising Professionals:

"If you're trying to wait out current volatile conditions in order to maximize the value of your stock donation, I would say that your heart is in the right place, but your strategy is wrong," says Jo-Anne Ryan, vice president, Philanthropic Advisory Services, TD Waterhouse Canada Inc. "Timing the market is a feat that virtually all investment professionals and experts agree is impossible to accomplish."

Her advice?

* If you are holding an investment because you believe it still has upside potential and do not want to sell it, consider donating the security and then re-purchasing it. By doing so you avoid paying capital gains tax on profits to-date and get a tax credit for the donation. You will also have "stepped up" the adjusted cost base of your investment, reducing capital gains and associated tax when you sell the investment.

* If you own securities that have depreciated since purchase, consider triggering a capital loss by selling one or more 'underperformers' and donating the cash proceeds to charity. With this strategy, you get a tax credit for the donation and you also generate a capital loss. This, in turn, can be used to offset other capital gains in the current year or in the past three years, or may be carried forward indefinitely.

* If you are still feeling uneasy about donating stock in light of current market conditions, consider a cash donation instead. You will receive a charitable tax receipt resulting in a tax credit of approximately 46% (subject to certain limits), which may reduce your taxes.

Susan Herr

Posted at 1:23 AM, Jun 05, 2008 in High Net Worth Donors | Permalink | Comment