Gifts of Stock, Mutual Funds and Bonds

Donating stock or securities offers a number of benefits to the donor. Gifts of stock, mutual funds, or bonds, especially when those securities have increased in value are often more tax efficient, because c apital gains tax will be avoided when appreciated property is contributed to Covenant House California. Here's an example to show how if works:

John wants to make a $1000 donation to help Covenant House save more kids from the streets. Say John has a stock worth $1000 that more than a year ago, he paid $200 to acquire. John has a taxable gain of $800 in that stock. If he sells the stock he will owe some part of the $1,000 proceeds to the IRS. However, if John donates the stock directly to Covenant House he will get a tax deduction for the full market value of the security ($1,000 in our example), and he will not owe any capital gains taxes to the IRS on that $800 profit!

To continue our example, suppose John is in the maximum tax bracket. Then he would end up with a larger tax savings than the original purchase price of his stock. This means, in our hypothetical example, at the end of the year John has turned his original $200 investment into around $300 in his pocket, and CHC has a gift of $1,000 -- a real win-win proposition.

If you donate stock to Covenant House California you are entitled to a federal income tax deduction based on the stock's fair market value on the date of the gift providing you have owned the stock for more than one year. You may deduct donated stock worth up to 30% of your adjusted gross income and c arry over the deduction for up to five additional years . Thus, if you have stock worth $10,000 that you wish to donate to our kids and an annual income of $40,000, you can deduct the full amount of your gift in the year you make it, thereby reducing your taxable income from $40,000 to $30,000. If your income was $100,000 and you wished to donate stock worth $100,000 to Covenant House California, you could deduct $30,000 for each of the first 3 years and then a further $10,000 in the fourth year.

Stock owned for one year or less is considered a short-term asset and usually won't produce attractive tax benefits by donating. Also, if stock has decreased in value, selling it and making a cash gift to the CHC will be more beneficial for you. In that case, you may take a capital loss on federal taxes, and still enjoy a charitable deduction up to 50% of your adjusted gross income.

Each gift of stock strengthens our mission while providing tax benefits for our supporters. Here are step-by-step instructions to help you take advantage of this gift planning opportunity:

For securities held by your broker:
Please give your broker the following information to transfer a gift of stock to Covenant House California:

STOCK BROKER INFORMATION:

Broker's name:		Morgan Stanley
DTC #		0015
CHC Active Asset Account #		237-080977-350
Account Executive:		Richard Downer, Vice-President
Telephone:		(213) 553-3300
Address:		601 S. Figueroa Street 28th Floor
		Los Angeles, Ca 90017

COVENANT HOUSE CALIFORNIA CONTACT INFORMATION:

Federal ID#:		13-3391210
Mailing Address:		1325 N. Western Avenue
		Hollywood, Ca 90027
CHC Contact Name:		Luz Buan
Phone:		(323) 461-3131, ext. 261
Fax:		(323) 957-7418

Please make sure that either you, or your broker, call Covenant House California at 1-323-461-3131, ext 261 with the name of the stock and the number of shares being transferred. This ensures the gift is properly credited and acknowledged. If you don't let us know, the shares magically appear in our account, and we can't thank you or provide you with the information you require to file your taxes. The national stock transfer system has no way to attach an individual name to transferred shares of stock, consequently we don't get any record in a stock transfer of the name and address of the donor.

If the stock certificate is held in your name:
Using registered mail, send the unendorsed securities to:

Luz Buan
CFO Covenant House California
1325 N. Western Avenue
Hollywood, CA 90027

In a separate envelope to the same address, send: A letter stating you wish to contribute the securities to Covenant House California, including the name and number of shares of each stock; along with a signed, but otherwise blank, stock power form.

To donate other securities:
To donate shares of mutual funds, bonds, or other securities, sometimes is a bit more complicated. If you have any questions about donating stock to CHC, or if you need additional information, please feel free to call. There are no foolish questions!

At Covenant House California, we recommend that you consult with your attorney or tax advisor for the various tax benefits and restrictions that may apply to your specific situation. Covenant House California does not provide legal or tax advice, but our staff are always available to you and your advisors to answer questions or to help arrange a planned gift to Covenant House California. By remembering our kids in this way you keep the promise of our Covenant with future generations.