Buying a stock when the price is low, maintaining it during it’s rise to profits, and then selling it at its height is often viewed as the stock market dream. However, that dream is dampened by a capital gains tax of 15% (scheduled to go up to 25% in January 2013) on the difference between the time you bought the stock and sold the stock.
To avoid this 15% loss, this kitten uses his most appreciated stocks, those stocks which normally would have the most money lost to capital gains tax, and uses them as his gifts to charity.
If this kitten were to write a check to a charity, he would have to sell the stock and, after capital gains, only 85% (or 75% come January) would make it to his choice charity. But, when he gifts the stock to the charity without selling the shares, he gets the value as a tax deduction and the charity doesn’t pay any taxes on it when they sell the stock. As a result, 100% of the value gets gifted. Now that’s smart and generous gifting.
Way to go, kitten!
To read more about this topic check out Charitable Gifting: How to Choose Appreciated Stock