How can securities be deducted when gifted to charity?

When securities are gifted to a charity, the donor can usually deduct the fair market value of the securities at the time of the donation. This means that if the securities have appreciated in value since their acquisition, the donor can benefit from that increased value when calculating their charitable deduction. This incentive is designed to encourage charitable giving, as it allows the donor to receive a larger tax benefit.

It's important to note that the fair market value is determined by what the securities would sell for on the open market at the time of the donation, reflecting current market conditions. This approach allows donors to maximize their tax deduction and supports the charitable organization financially, assuming the charity is recognized as tax-exempt.

Gifted securities that have decreased in value are typically not favored for donation if the donor seeks a tax deduction since the donor would be better off selling the securities, recognizing the loss, and then donating cash instead. This strategy optimizes tax implications and maximizes benefits for both the donor and the charity.