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!
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!