Originally created 12/22/99

Donating stocks can bring big tax breaks

There's a gift you can give this holiday season that can give you something back -- a big tax deduction.

Donating highly appreciated securities to charity is an effective, but rarely used, way to be philanthropic while minimizing your tax liability, according to tax experts and nonprofit agencies.

"It will make the cost of (donating) fairly inexpensive to you," said Aubrey Rhodes, an Augusta tax attorney.

It works like this: You purchase 100 shares of a company's stock for $10 a share, an initial investment of $1,000. The stock's value climbs to $100 a share, giving your investment an appreciated value of $10,000.

Let's say it's not worth liquidating the stock because it will trigger capital gains taxes (20 percent if the stock was held more than a year, your income-tax rate if held less) and bump you into a higher income-tax bracket. So you donate the shares to charity.

Your $1,000 investment results in a $10,000 tax-free gift to a good cause while allowing you to deduct a whopping $10,000 from your income-tax and estate-tax liabilities.

An example of this strategy in action is last week's gift of 700 shares of Sun Microsystems stock to the Boys and Girls Clubs of Augusta by John Hebbard Jr., owner of Hebbard Electric, an electrical contractor.

The nonprofit organization used the shares, which had a value greater than $50,000, to purchase a new 15-passenger van, discounted by Milton Ruben Chevrolet, to help transport at-risk youth to and from the Dogwood Terrace club.

"We've needed this van since we opened the facility in 1995," said Armen Boyajin, Boys and Girls Clubs development director. "Mr. Hebbard basically said the money could be used for that."

Mr. Hebbard, who was a club member as a youth in the 1950s and 1960s, has given the nonprofit group more than $200,000 worth of stock during the last three years. He said he purchased the Sun Microsystems stock about two years ago.

Mr. Hebbard, 52, said the donations not only help with his tax planning, but give him a chance to give back to an organization he said helped him stay out of trouble as a youth.

"They were strict down there," Mr. Hebbard said of the former Boys and Girls Club facility on Broad Street. "They kept you on a fairly straight line. It was the only place some of us got any discipline. A lot of kids I knew who didn't go there wound up getting into trouble."

Reach Damon Cline at (706) 823-3486.


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