While you avoid capital gains tax when donating appreciated stock to a 501(c)(4), you will want to confirm with the organization that it will be able to avoid taxation on the capital gain as well. The 501(c)(4) takes the donor’s basis in the donated stock under the general rule for gifts at I.R.C. 1015(a).
A 501(c)(4) is subject to tax under I.R.C. 527(f) on the lesser of its net investment income or certain political activity. My understanding is that tax usually hits at 35%, and so paying it is worse than the donor paying at 15-23.8% and then donating the balance. On the other hand, I believe that organizations can get around this if they can avoid having net investment income and certain political expenditures in the same year. The org should know if it is going to have the specified type of expenditures in a year it may sell the donated, appreciated stock.
It depends a lot on what the org is doing, but my understanding is that even most advocacy 501(c)4 organizations stick to lobbying and not campaigning (which would trigger 527(f) taxes). But you’re right, worth checking!
You do not avoid capital gains tax when giving to 501(c)4.
You do not avoid short-term capital gains so this really only applies to stocks held for more than a year.
For stocks that are in a loss, definitely sell before you donate so you can get the capital loss as a write-off.
Be mindful of deduction limitations: stocks is 30% AGI vs cash-only 60% (a mix of both is a bit confusing but basically 50%).
It gets more complicated with stock incentives you get from working at a tech company. Stock option exercises require a lot more careful planning.
1 & 2: I’m really very sure that’s incorrect. Is it possible that you’re thinking about how you don’t get a tax deduction when giving to a 501(c)4?
3: Agreed! See @Jason ’s reply above.
4 & 5: Yup!
While you avoid capital gains tax when donating appreciated stock to a 501(c)(4), you will want to confirm with the organization that it will be able to avoid taxation on the capital gain as well. The 501(c)(4) takes the donor’s basis in the donated stock under the general rule for gifts at I.R.C. 1015(a).
A 501(c)(4) is subject to tax under I.R.C. 527(f) on the lesser of its net investment income or
certain political activity. My understanding is that tax usually hits at 35%, and so paying it is worse than the donor paying at 15-23.8% and then donating the balance. On the other hand, I believe that organizations can get around this if they can avoid having net investment income and certain political expenditures in the same year. The org should know if it is going to have the specified type of expenditures in a year it may sell the donated, appreciated stock.
It depends a lot on what the org is doing, but my understanding is that even most advocacy 501(c)4 organizations stick to lobbying and not campaigning (which would trigger 527(f) taxes). But you’re right, worth checking!