The concept: Instead of writing a check, a donor makes a gift of an appreciated asset, such as stocks, bonds, mutual funds, property (houses, farms, and undeveloped land), or works of art. Provided the asset is held in a taxable account, the donor receives an income tax deduction for the full fair market value (FMV) of the appreciated asset and avoids paying any capital gains taxes.

Example 1: Col. Jim Smith, USMC-Ret., purchased 1,000 shares of stock for $5 a share. Today it’s worth $50 a share for a total investment value of $50,000. If Smith donates all 1,000 shares to the XYZ Fund, he receives an income tax deduction for the full FMV of the stock and avoids paying capital gains on his $45-a-share gain, saving him about $6,750 in capital gains taxes. And as a qualified charity, the XYZ Fund pays no capital gains on the sale of the stock, benefiting from the entire $50,000 gift.

The rules: Charitable associations are either “50-percent limit” organizations (such as hospitals and medical research, religious, educational, and other publicly supported organizations) or “30-percent limit” organizations (such as veterans’ associations, nonprofit cemeteries, and certain private foundations). Deductions for gifts of appreciated property are limited to 30 percent of the donor’s adjusted gross income (AGI) for 50-percent limit organizations an  20 percent of the AGI for 30-percent limit organizations. Deductions not used because of these limits can be carried forward up to five years.

Example 2: Angela Stanfield inherited 100 acres of farmland worth $3,000 an acre in 1980 and $8,000 an acre today. To help reduce her estate tax liability, she donates 10 acres to the XYZ Fund for a gift value of $80,000. Because it is a 50-percent limit charity, the gift qualifies for a deduction up to 30 percent of her AGI.

Assuming her AGI is $75,000, she is limited to a $22,500 income tax deduction. But she can carry over the unused portion of the gift ($57,500) for up to five years or until it is used up.

With soaring real estate values, “real estate with retained life estate” is an increasingly popular giving method. A donor gives a principal residence, vacation home, or family farm to a qualified charity but remains in the property for life, for a term of years, or both. He or she continues to use the property but receives an income tax deduction for the remaining interest in the property, removes the property and future appreciation from the estate, and avoids capital gains taxes and probate issues.

— Former Army Capt. Phil Dyer, CFP, is deputy director, Benefits Information. For additional financial counseling, MOAA members can contact Garrett Planning Network (GPN) at (866) MOAA-GPN (662-2476) or online at www.garrettplanning.com.