Maximize Your Impact and Reduce Your Taxes by Gifting Stock

As we approach the end of 2024, many individuals are looking to make their charitable donations. While many default to gifting cash, there is an often-overlooked alternative: Gifting Highly Appreciated Stock.

By donating shares that have appreciated in value, donors can maximize the charitable impact of their gift and achieve more favorable financial outcomes. For those of you that hold Walmart shares with high embedded capital gains, gifting those shares can help you diversify your portfolio in a tax efficient way while also making an impact!

Here's why gifting highly appreciated stock can be a smarter choice than giving cash.

1. Avoid Capital Gains Tax

When you donate appreciated stock directly to a charity, you avoid paying capital gains taxes on the profit. Normally, selling the stock would trigger these taxes, but by donating it instead, you and the charity can avoid them. The charity, being tax-exempt, can sell the stock without incurring any taxes, ensuring that the full value of the stock goes to the cause.

2. Claim a Larger Deduction

Donating appreciated stock allows you to claim a charitable deduction for the full market value of the stock - as long as it’s held for over a year. This could lower your taxable income, especially if you're in a higher tax bracket, potentially leading to greater tax savings than a cash donation.

3. Greater Impact for the Charity

By donating stock, the charity receives the full value of your gift. It can sell the stock without paying taxes, maximizing the amount available to support its mission. This can make your contribution go further than a cash gift of the same amount.

4. Portfolio Diversification

For individuals holding a concentrated position of highly appreciated stocks (e.g. WMT), donating those shares can help reduce your concentration risk while benefiting a good cause. This strategy lets you diversify without triggering capital gains taxes.

Cash vs. Shares

Darryl is a Walmart Sr. Director and gifts $50,000 per year to a handful of local charities. In the past, he funded the gifts by selling a portion of his Walmart Restricted Stock Units (RSUs).

Option 1: Sell the Shares and Gift Cash

• Sell $50,000 of Walmart shares with a $30,000 cost basis resulting in $20,000 capital gain.

• The $20,000 capital gain is taxed at 23.8% resulting in a $4,760 tax expense.

• Net tax, the charity receives a gift of $45,240 and Darrel can take a tax deduction of the same amount.

  
  

Option 2: Gift the Shares to Charity

• Darryl sends $50,000 of Walmart shares directly to the charity.

• No capital gain taxes are realized by Darryl or the charity.

• The charity receives the full $50,000 gift and Darryl takes a tax deduction of the same amount.

  
  

Clearly Option 2 benefited the charity and the donor at the expense of the IRS.

I want to wish everyone a Happy Thanksgiving. It is certainly a busy time of year - especially if you work in retail! If you are seeking guidance on the Walmart DCMP, charitable gifting strategies or just want to get organized financially for 2025, please reach out. I'm happy to connect!

Mark Chisenhall, CFA

Financial Advisor

Taurus Financial Planning, LLC

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Taurus Financial Planning is a Fee-Only Wealth Management firm based in Bentonville, AR. The firm offers comprehensive financial planning, tax planning and investment management to corporate executives across the country.

Taurus Financial Planning is a Registered Investment Advisor with the State of Arkansas. This information is provided as a guide to assist you in your financial planning. The specific examples are provided for illustration purposes only and are not representative of specific investments or guarantees of future returns. Please consult with a professional for specific questions regarding your particular situation. If there is any error or inconsistency between this document and the official company plan documents, your company plan documents will govern.

This publication is for informational purposes only and is not intended as tax, accounting or legal advice or as an offer or solicitation of an offer to buy or sell or as an endorsement of any company security fund or other securities or non securities offering. This publication should not be relied upon as the sole factor in an investment making decision. Past performance is no indication of future results. Investment in securities involves significant risk and has the potential for partial or complete loss of funds invested. It should not be assumed that any recommendations made by the Author, in the future, will be profitable or equal the performance noted in this publication.