An Illustration

Mrs. Smith, age 75, inherited publicly-traded stock in 1969 worth $20,000 at the time.  The stock has since grown in value to $100,000.  It is paying a 2% dividend, or $2,000 a year – all taxable as ordinary income.

Mrs. Smith and her husband, age 76, have already provided for their children and are interested in supporting CFS.  They are worried about the future of the stock market and would like some additional current income to spend on their grandchildren.

If Mrs. Smith were to sell her stock and reinvest in a higher yielding asset, she would have to pay tax on a hefty capital gain of $12,000 (15% of the increase in value of $80,000). Instead, Mrs. Smith decides to make a gift of the stock to CFS in exchange for a Charitable Gift Annuity.

• CFS will pay Mrs. Smith $6,400 (6.4%) each year for the rest of her life, and then her husband, if he survives her.  A large portion will be treated tax-favorably as capital gain income instead of ordinary income each year.
• Mrs. Smith can claim an immediate tax deduction of $34,962, which in her 33% bracket, may save her as much as $11,537 on her tax return.
• Mr. and Mrs. Smith now have over $4,400 more in income (before taxes) every year.