Gifts of Appreciated Securities Given the realities of the financial marketplace, you are no doubt constantly reviewing your investment portfolio. Despite volatility, you may have realized a net gain in the value of certain stocks and mutual funds. You’re pleased with those returns, but you are also aware that if you sell the securities, you could face unwanted capital gain taxes. What should you do? Many donors choose to make gifts in the form of common stock or other publicly traded securities. Substantial tax benefits are realized by transferring appreciated securities held long-term (owned by the donor for more than one year prior to the gift) to the Northern Illinois University Foundation. By making such a gift, the donor is entitled to a federal income tax deduction for the full fair market value of the security, subject to applicable limitations. By contributing the security instead of selling it outright and contributing the proceeds of the sale, the donor avoids capital gains tax liability. This means you receive a double tax benefit. Example: You have stock with a current market value of $5,000. It originally cost you $3,000 (the “cost basis” of the stock). If sold you will realize an untaxed capital gain of $2,000. If you have owned the stock for more than one year, your capital gains tax rate would be 15% of the $2,000 (=$300). By making a gift of this stock you may claim a charitable deduction of $5,000 that would generate a net tax savings of $1,400 ($5,000 multiplied by an assumed marginal tax rate of 28%). When the $1,400 is combined with capital gains tax savings of $300 (=$1,700), the gift of $5,000 actually costs you only $3,300 ($5,000 - $1,700 = $3,300). It’s easy to make a gift of securities. There are three methods to transfer the stock: If the certificates are held in a brokerage account, simply ask your broker to contact our office for instructions on making the transfer. If you have the stock certificates in your possession, send the unendorsed stock certificates by registered mail to our office. Enclose a cover letter outlining the purpose of your gift, along with a description of the issues and the number of shares and certificates. In a separate mailing, send signed “stock power” forms for each certificate with the name of the issue filled in and the signature guaranteed by a broker or officer of a national bank. We can sell the stock more readily if you sign a blank stock power without filling in our name. Lastly, you can hand-deliver securities to the NIU Foundation Office. For more information, please contact John Sentovich, Director of Gift Planning, at 815-753-1344 or e-mail sentovich@niu.edu.