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Stocks’ slide may cut gifts to charities

Year-end ‘gifts’ see their values fall daily

POSTED: October 29, 2008 5:00 a.m.
For those with significant stock holdings, donating shares with appreciated value to charity has given them an avenue to avoid capital gains taxes.

Under IRS regulations, the holder gets to claim the full increased value of the stock or security that is donated to a charitable organization.

But what happens in a year that stocks have been in a downward free fall?

That has left a number of organizations concerned about traditional year-end gifts of stock.

"Most annual giving occurs at the end of the year, and we are anticipating some type of drop off on our annual fund support," said Bruce Howerton, vice president for institutional advancement at North Georgia College & State University in Dahlonega. "I think most charitable organizations are expecting some type of drop off in their annual fund gifts."

There is no tax advantage in giving stocks that have lost value. Most experts agree that if the holder is planning to use a stock that has declined from its original value, they are better off to sell the stock and claim a loss on their tax return.

"There is only value when there are appreciated securities. When the value of the stocks decline, the tax advantage of giving evaporates," Howerton said.

He said the decline in stock value comes at a time when the state is facing a budget crisis of its own and there are more demands on the college’s foundation.

"We’re going to make a stronger appeal for gifts," he said.

At the same time, the college’s endowment funds, which are invested in market-related securities, also have felt the effects of the financial crisis.

Jackie Wallace, president of United Way of Hall County, said she has not heard of any major donors who cannot fulfill their pledge."I’ve not had anyone tell me that they cannot honor their pledge due to the stock market," Wallace said.

Unlike the college, United Way’s yearly pledges are spent within the year. The agency has an endowment fund with the North Georgia Community Foundation that is separate from pledge funds.

"Our policy is that when anyone makes a gift of stock, it is sold immediately," Wallace said. "We hold nothing in speculation."

Officials at Gainesville State College are taking some degree of consolation that they conducted their annual fund drive earlier in the year, before the recent decline in the financial markets.

"I think people in this community really see the power of education, especially in a down time," said Pat Guthrie, director of development at Gainesville State College. "We’re hoping that if they have to limit their gifts, that they will support education."

She said she couldn’t speculate on the possible effect decreasing stock values will have on the foundation’s year-end giving.

Guthrie, like Howerton, said the college’s endowment funds have also been hurt by the slide on Wall Street.

"We’re just like your investments at home," Guthrie said.



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