Jill is considering making a donation to her church. She wants to give $50,000 for the new church building. She has some stock with a FMV of $50,000 and an adjusted basis of $10,000 that she has held for 3 years. She is planning to sell the stock and donate the $50,000 proceeds to the church. What should she consider before taking that action?
What will be an ideal response?
If Jill sells the stock, she will realize a long-term capital gain of $40,000 on which she will pay 15% tax ($6,000) if she has no losses against which to offset the gain. Her after-tax proceeds will be $44,000 and she will need an additional $6,000 to donate $50,000 to the church. However, when a taxpayer donates long-term capital gain property, the amount of the contribution is the FMV of the property. Thus, Jill gets a tax deduction of $50,000 (subject to the charitable contribution limits).
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