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Think Outside the Box with Gifts of Noncash Assets
Posted June 2008

Although well past filing your income-tax return for 2007, you may be in the midst of planning your itemized deductions for 2008, including those you receive for charitable contributions. You might even be pondering IRS Form 8283: "Noncash Charitable Contributions." If so, as you decide what part of this sometimes perplexing form pertains to you, take a moment to congratulate yourself. It likely means you are about to make a tax-efficient gift.

Gifts of assets to , such as appreciated stock, real estate, closely held stock, tangible personal property, and insurance policies, involve Form 8283. As a rule a gift of a noncash asset will provide you with a greater tax advantage than a gift of cash, because you avoid capital-gain tax in addition to the tax deduction you receive. So the IRS wants to know a little more about the nature of the asset you have given, and Form 8283 is how you give them that information.

Giving noncash assets is an integral part of gift planning. When you consider the overall worth of extraordinarily wealthy individuals—Ted Turner, Bill Gates, Warren Buffet, for example—how much of their net worth do you think is composed of cash? A relatively small percentage. And when you read about the ten-figure gifts those individuals have made, you can be certain they didn't write checks!

So, you're not on the list of the world's ten richest individuals? That doesn't mean you can't employ their giving strategies.

For example, Mr. A owns securities valued at $22,000 that he purchased three years ago for $2,000. Because he is in the 33% tax bracket, Mr. A's gift of the securities to provides him with a $22,000 deduction, saving him $7,260 in income tax (33% of $22,000).

In addition, Mr. A avoids capital-gain tax on his $20,000 paper profit, which saves $3,000 more ($20,000 gain x 15%). The net cost of his $22,000 gift is $11,740 ($22,000 less $7,260 less $3,000).

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We would be happy to discuss with you how a gift of appreciated property might fit into your own personal, financial, and charitable planning.

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