Giving Appreciated Stock To Charity

I know I should have written this a month or more ago, but since one can contribute appreciated securities any time of the year, better late than never is okay.

We contribute appreciated securities because tax law allows us to avoid the deferred tax on the unrealized gain. If we sold the security and contributed cash we wouldn't. The usual procedure is to select an appreciated stock one wants to unload. This, however, might not be the lowest cost-basis position in the portfolio.

Here is an easy procedure I have used for 25 years: First sell something you do want to get rid of, perhaps with a loss, or at least with little gain, to raise cash approximating the amount you want to contribute. Then contribute your lowest cost-basis stock and repurchase a like number of shares. The net effect of these trades is to bump up the cost basis of what you want to retain to market, while avoiding the maximum unrealized gain in your portfolio. Of course, if you have cash sitting around exceeding the amount you wish to contribute, you can skip the first step.

There are several benefits to this procedure:

As noted, it enables you to avoid the maximum unrealized gain.

It separates investment from charitable decisions.

Price determines the size of the gift; it also sets the new cost basis; beyond that it isn't an issue.

And, it gives you more flexibility.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.