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How to Give Cash, Securities, and Personal Property

Gifts of Cash This is the simplest way to give, but it is a good idea to know the basic rules. You can deduct a cash gift for income tax purposes only in the year in which you contribute it. A pledge or promissory note is not deductible until it is paid. Your cash gifts are deductible up to 50% of your adjusted gross income for the taxable year. Any excess is deductible over the next five years.

Gifts of Securities If you contribute long-term appreciated securities to us, you get a two-fold income tax benefit: a charitable deduction for the full present fair market value, and no tax on the appreciation. The limit on deductibility in any tax year is 30% of your adjusted gross income; any excess is deductible over the next five years.

Example: Elizabeth contributes long-term stocks. The stocks are now worth $15,000, but they cost her $10,000. She is entitled to a charitable deduction of $15,000. She will pay no tax on the $5,000 appreciation.

If you want to give us securities on which you have a loss, consider selling them instead and donating the proceeds to us. You will then have a loss deduction in addition to the charitable deduction.

Gifts of Tangible Personal Property Maybe you would like to contribute an art object, prized collection, or antiques. Such tangible personal property is subject to special IRS rules.

Let us assume that years ago you acquired an important painting that would now generate long-term capital gain if sold. You would give this to our institution and take a deduction for its full fair market value.

You can do this if the painting's use is related to our exempt function. But if you are unable to establish that we can use the gift property for a purpose related to our function, you can deduct only the cost basis.

This kind of gift generally is deductible up to 30% of your adjusted gross income if it meets the related-use test. If not, and you elect to deduct its cost, the 50% limit applies. The five-year carryover is allowed for any excess deduction.

A Deduction You Can Still Count On If you itemize, there are tax benefits in giving to us. Most of all, you have the satisfaction of supporting our ongoing needs.

How to Give Real Estate

If you've been thinking about making a substantial gift to The University of Alabama in Huntsville, perhaps you should consider real estate. A gift of cash or securities at this time may not be practical. Your personal residence, farm, vacation home, commercial property, or parcel of undeveloped land might be more suitable.

A present or future gift offers you the opportunity for valuable income tax and estate tax savings. You can also free yourself of burdensome management and the problems involved in selling the property or leaving it to estate liquidation.

Whether we keep or sell the property, you'll make a satisfying and enduring contribution to our work.

Choose the Time of Your Gift

If convenient for you, you can make a gift of real estate now. Assuming you itemize deductions on your return, you'll get a substantial income tax deduction, and you'll have the satisfaction of seeing the results of your generosity.

Perhaps an immediate gift isn't desirable. You may want to use the property a while longer or even retain lifetime use. In any case, you can still make the necessary arrangements now and benefit from a sizable current income tax deduction.

How to Figure Your Tax Benefits

When you make an outright gift of real property, you obtain an income tax charitable deduction equal to the property's full fair market value (if held long-term) instead of the lower cost basis.

This deduction lets you reduce the cost of making the gift and frees cash that otherwise would have been used to pay for taxes and upkeep. Also, you avoid tax on the property's appreciation, the transfer isn't subject to the gift tax, and the gift reduces your taxable estate.

Your deduction for a gift of appreciated real estate in any year is generally limited to 30% of your adjusted gross income, with a five-year carryover of the unused deduction.

Continue to Live in Your Home

You can secure a current charitable deduction by deeding a remainder interest in your personal residence to us. This lets you occupy and enjoy the full use of your property for life.

Example: Paula, who is 65 years old and a widow, donates a remainder interest in her home, subject to her right to occupy or rent the home for life. At the time of her gift, the market value of the property is $200,000. Her accountant, using a formula required by the IRS to discount the gift based on Paula's life expectancy and the future depreciation on the house, determines the value of her income tax deduction to be in excess of $55,000.

The personal residence rules also apply to a farm, vacation home, condominium, or stock in a cooperative housing corporation, if used by you. A farm may include acreage with or without the house.

Explore the Benefits of a Gift of Real Estate

When you give your home or other real estate to us, you create an enduring testimonial of your interest in our important goals. Your personal satisfaction is complemented by valuable tax benefits.

Giving Life Insurance

Do you remember why you invested in life insurance? It probably was because your estate was small or cash poor. You wanted to make sure your beneficiary would receive funds immediately.

Perhaps you don't need all that coverage today. You have other substantial investments and benefits that will yield a good income for your family after your lifetime. Yet you still have those policies.

Putting Your Insurance to Work If you're thinking about making a gift to The University of Alabama in Huntsville, your life insurance could be the most sensible way to make such a gift. Consider these benefits:

You can get a tax deduction. By naming us as beneficiary and assigning ownership of the policy to us, you can get a valuable income tax charitable deduction.

Your income isn't cut. A gift of an insurance policy won't reduce your current income.

Your cash flow may increase. If you stop paying the policy premiums, you'll enjoy an increase in available cash. Or, if you continue paying the premiums on a policy you contribute to us, you may claim the premium amount as an annual tax deduction.

Your gift is easily arranged. You can transfer ownership of an insurance policy to us without the legal expense of preparing a will or codicil.

You are giving us helpful options. If the policy has a cash surrender value, we can cash it in, borrow against it for our current needs, or convert it to a paid-up policy, if necessary.

Get Generous Tax Benefits

When you no longer need the protection of your life insurance, your benevolent gift to us will strengthen our work and save you taxes.

Here's how your income tax deduction is figured. When you contribute a policy on which premiums remain to be paid, your deduction generally is close to its cash surrender value - actually, a bit more. When you contribute a paid-up policy, your deduction is generally what it would cost to replace the policy at your age and state of health at the time of your gift, but never more than your investment in the policy. (The insurance company can calculate these values.)

Assuming you itemize deductions, your gift is deductible up to 50% of your adjusted gross income, with a five-year carryover for any excess.

Example: Last year, Harold donated a policy then worth $20,000. In addition, he made cash gifts to various charitable organizations totaling $6,000, so the total of his charitable gifts for the year was $26,000. As his adjusted gross income was $42,000, he deducted $21,000 (50% of $42,000). He plans to deduct the $5,000 balance of those gifts on this year's return.

If you'd rather hold on to your policies, consider making us the contingent beneficiary of your insurance.

Now to Secure Maximum Benefits

Your life insurance is more valuable than ever. By a gift of insurance to us now, you can save taxes and increase your spendable income. Most importantly, your contribution will support our important work.

In concert with your insurance advisor, we'll help you decide the way you can benefit most from your gift.

Contact Connie Gerlach at 256-824-6505, or connie.gerlach@uah.edu.