Giving Appreciated Stock or Mutual Funds to Bowdoin

Story posted November 30, 2006

Giving Appreciated Stock or Mutual Funds to Bowdoin

Federal and most state tax laws offer special incentives for non-cash gifts of appreciated property. For many donors, giving appreciated stock or mutual fund shares to Bowdoin may be preferable to giving cash for the following reasons:

  • You avoid capital gains tax. Any gain is taxable if you sell stock or mutual fund shares yourself, but not if you transfer ownership to Bowdoin.

  • Your charitable deduction for federal income tax purposes is based on the full fair market value of the shares on the date the gift is made.

  • You receive credit from Bowdoin for the full fair market value of the shares, but the cost to you is only your original purchase price.

Gifts of Appreciated Securities vs. Gifts of Cash

The accompanying chart illustrates the tax advantages of making a gift of appreciated stock. Please note that the benefits of making such a gift may be fully realized only if you have held the shares 12 months or longer. Consult your tax advisor for assistance.

stock_graph_web.jpg

Suppose that you would like to increase your annual contribution to Bowdoin from $2,500 to $5,000, but you want to do so in the most economical manner. Ten years ago you purchased 200 shares of PolarBears, Inc. at $5/share for $1,000. That stock has appreciated and is now worth $25/share or $5,000. If you sell the stock outright, you will incur a taxable capital gain of $4,000.

By giving the stock to Bowdoin, you avoid paying the capital gains tax. Moreover, you increase your annual gift to Bowdoin to $5,000 with an after-tax cost increase of only $1,025 over your usual $2,500 cash gift ($2,650 vs. $1,625). The same incentives apply for gifts of appreciated mutual fund shares.

Please contact Bowdoin's Development Office at 207-725-3094 or
stockgft@bowdoin.edu before initiating a stock or mutual fund gift.

How to Make Stock Gifts

There are three methods of giving stock to Bowdoin. The best method for you may be determined by whether or not you hold the stock certificate. For gifts of closely held stock, please call the Office of the Treasurer for assistance.

If you wish to use stock to fund a planned gift, please contact the Office of Planned Giving at (207) 725-3263 for appropriate transfer instructions.

Stock Held in a Brokerage Account
Have your broker contact the Bowdoin's Development Office at 207-725-3094 or stockgft@bowdoin.edu. The College will provide appropriate transfer information.

Please note that once shares have been transferred into a Bowdoin-owned brokerage account, any subsequent disposition of the gift is made at the discretion of the College. Bowdoin's policy is to sell stock as soon as it is received in order to realize the gift's current value.

For More Information

Regarding the purpose and/or designation of your gift:
Randolph H. Shaw '82
Vice President for Development and Alumni Relations
Bowdoin College
4100 College Station
Brunswick, ME 04011-8432
Tel: 207-725-3407
Email: rshaw2@bowdoin.edu

Regarding the procedure for making your gift:
Katie Hoffmann Tukey
Tel: 207-725-3094
Email: Email: stockgift@bowdoin.edu

Please feel free to contact us any time with questions or concerns.


If You Hold the Stock Certificate
Please contact the College at 207-725-3094 for instruction on physical transfers of stock.

If There is No Stock Certificate
Individuals in dividend reinvestment plans and others who do not hold certificates in either their own or a street name may also make gifts of stock. As each company has its own method for making a gift, it is best to call the company directly for instructions. Bowdoin's Office of the Treasurer is happy to assist you in this process.

The Value of a Stock Gift

The value of a publicly traded stock is always the average of the high and low share prices on the date of the gift. The date for valuing the gift depends on the method of transfer, and if the stock is not traded on a public exchange, an appraisal may be required to determine its value.

  • If your broker transfers the stock to Bowdoin, the date of the gift is defined as the date on which the stock enters Bowdoin's account.

  • If you deliver the stock certificate in person to Bowdoin, the date of the gift is the date of delivery. If the certificate has been re-issued in Bowdoin's name, the gift date is the date on the certificate.

Gifts of Mutual Fund Shares
It is recommended that you contact Bowdoin's Office of the Treasurer 207-725-3426 to expedite a gift of mutual fund shares. Most mutual fund companies require notarization as well as several documents, including a donor authorization
letter, to effect the transfer of shares. Sample letters and other necessary documents are available from the Office of the Treasurer. If you are unaware of the appropriate method to authorize the transfer of your mutual fund shares, the Office of the Treasurer will assist you in completing the transfer.

The transfer of mutual fund shares is more time consuming than the transfer of stock. You should allow up to six weeks to complete the transaction, so plan your year-end charitable giving accordingly.

The date of gift is established when the transfer is completed and Bowdoin "owns" the mutual fund shares. For gifts of mutual fund shares in open-end investment companies, fair market value is the redemption price on the date the transfer is completed. Closed-end investment company shares are valued the same way as securities traded on a stock exchange or over the counter.

Gifts from IRA Assests Through 12/31/07

There is now a way to make charitable gifts using your IRA assets. The Pension Protection Act of 2006 includes an IRA rollover provision that permits tax-free
distributions from IRAs to charities like Bowdoin. It provides an exclusion from gross income for certain distributions of up to $100,000 per year from an individual retirement account (traditional or Roth), which would otherwise be considered taxable income. If you have saved tax-deferred income in an IRA and must begin taking required minimum distributions from that account at age 701/2, you will pay income tax on that amount. By making a gift to Bowdoin from your IRA in an amount equal to or more than the required minimum distribution for that year, you can accomplish your charitable goals and reduce your tax liability.

Please note the following parameters:

  • You must be 701/2 years of age at the time of the gift.

  • You can give up to $100,000 per year in tax years 2006 and 2007.

  • Your gift must fund an outright gift (it cannot fund a life-income gift like a
    charitable trust).

  • The gift will count against your required minimum distribution.

  • You will not receive a charitable deduction for your gift.

  • The window to make these gifts closes on December 31, 2007.

  • In order for the amount transferred from your IRA to Bowdoin to be a "qualified charitable distribution," current rules stipulate that the funds be transferred directly from the plan administrator of your IRA to Bowdoin.

Your tax and financial advisor can provide advice on the applicability of the new law to your particular circumstances. If you think a gift from IRA assets might make sense for you, please contact the Office of Planned Giving at 207-725-3436 for more information and transfer instructions.

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