The American Gift Fund: Tax Deductions

ere's how tax deductions are determined when you make a gift to the Fund.
The Fund is a public charity, and donations to it qualify as charitable deductions. Itemized deductions for donations to the Fund are limited for cash gifts to 50% of adjusted gross income or for appreciated property to 30% of AGI. Corporate deductions are limited to 10% of income, as specially calculated. The portion of a charitable deduction not used in a given tax year (because it exceeds the limits above) may be carried forward and used for up to five years.

Like many aspects of taxation, charitable deductions can be complex. All charitable donors should obtain personal tax advice from a qualified professional. The Fund will accept gifts of cash or securities. The table below shows how a gift is valued when determining a tax deduction
Donation	Deduction
Cash	Value of cash donated

Securities held less than one year	The donors original cost basis

Securities held for more than one year:
Publicly traded securities	The mean price at which the security traded on the day the donation is accepted.
Mutual funds	The net asset value on the day the donation is accepted.
Other Securities	The fair market value determined by the donor, using an accepted method.

n example.
The Flemings are a couple who pay combined federal and state income taxes at a 38% rate. They own stock which they bought for $20,000 years ago; it has appreciated to $100,000. What will be the tax benefit of making a $100,000 donation to the Fund?

Charitable gift deduction allowed upon acceptance of gift	$100,000
The Flemings' federal / state tax rate	x .38
Tax savings from charitable deduction		$38,000

Capital gain if securities are sold	$80,000
Capital gain federal tax rate	.20
Capital gain state tax rate	.05
Total capital gain tax rate	x .25
Capital gain tax due ($80,000 x .25)		+$20,000
Total tax savings		$58,000

The total tax savings on a $100,000 gift is $58,000, compared to selling the securities, paying tax on the appreciation, and not making a charitable gift. By making the gift the Flemings avoid paying tax on future appreciation and earnings and remove the appreciation of this asset from their estates.