GRB Law Article

Year-End Gift Giving

By: Lea E. Anderson
Date: December 10, 2014

Author Spotlight

Image of Lea Anderson, author of article on Year End Giving Lea E. Anderson maintains an active Estate Planning & Administration practice, focusing on the drafting of wills, testamentary, irrevocable and living trusts, advance health care directives, charitable planning, living wills and durable powers of attorney, amongst others.  About Lea

As the calendar year-end approaches, many of us consider the time-honored tradition of gift giving.  Whether it’s a thank you to a friend, a surprise to another, or a gift to a favorite charity, all gifts have rules.  While many gifts are given for the pure joy of giving, other gifts are given with a definite expectation of receiving something in return.  Many gifts in this latter category are cash or property gifts to charities with the expectation of an income tax charitable deduction in return.  Charitable gift rules are found within the Internal Revenue Code (IRC).  These rules primarily focus on the value of the gift for charitable purposes and the date the gift is given. 

The value of a gift of cash, whether by check or electronic transfer or credit card charge, is its face value.  The value of a gift of securities is established by its fair market value on the date of delivery.

Obviously, a charitable gift given in 2014 is deductible on the 2014 income tax return.  A not so obvious question is whether “given” means the date the gift was made or the date on which the recipient received the gift; these dates are not always the same.  With the days in December rapidly coming to an end, how can one have certainty that the gift qualifies or is delivered in calendar year 2014? 

The simplest means of delivery is personal delivery which clearly establishes a delivery date.  The IRC also grants users of the US Post Office, a fellow branch of government, a presumption of delivery on the date of posting.  Use of the US mail to deliver a properly addressed and stamped gift is presumed to establish delivery at the date of posting.  For additional certainty, one can also send the gift by certified or registered mail to objectively establish the date of mailing.  However, the IRC does not grant this same presumption to private delivery services such as UPS or Federal Express.  For private delivery, the date of receipt of the gift by the charity would establish the delivery date.

If your gift is one of stock, you may want to consider donating the stock directly to the charity instead of selling and donating the proceeds.  A maximum tax advantage is achieved by donating stock which has been owned more than one year and which has increased in value during that time.  The tax advantage is two-fold.  The first advantage is the charitable deduction equal to the entire value of the stock.  The second advantage is that one does not have to pay capital gains tax on the stock’s increase in value during the period of ownership. 

Delivery of a stock certificate is more complicated than delivery of a check so close attention to the IRC rules is required in order to receive the anticipated deduction in the anticipated calendar year.  The stock must either be properly endorsed to the charity or the donor must give the charity a properly endorsed stock power.  Assuming the stock is properly endorsed, personal delivery and use of the US Postal Service establishes delivery date as discussed above.

Different delivery rules apply if the stock is not properly endorsed to the charity, if the stock is delivered to the charity’s agent or broker to be reissued in the name of the charity or to be sold.  If you contemplate this sort of delivery, we encourage you to give us a call to double check the delivery rules which would apply.

As with most gifts, planning and acting in advance is necessary to achieve the desired tax treatment.  Gift giving can be a valuable exercise for both the giver and the recipient, but should be done with careful planning to maximize the benefits to each. 

Best wishes to all of our friends for successful year-end gift giving!
As with most gifts, planning and acting in advance is necessary to achieve the desired tax treatment.  Gift giving can be a valuable exercise for both the giver and the recipient, but should be done with careful planning to maximize the benefits to each.
- Lea Anderson

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