Unlocking Greater Giving: How Appreciated Securities Create Win–Win Strategies for Charitable Clients

By Mike Sopko, CTFA

Mary is the type of client every advisor appreciates – organized, goal‑driven, and consistently generous with her charitable giving. Each year, her contribution to the university arrives as cash from her checking account, without anyone considering whether there might be a better way to give.

Mary and I first met when she decided to update her retirement plan beneficiary designation forms to include the university as the primary beneficiary. She is a frequent flyer, enjoys great food and wine, hiking, and college sports. Detail oriented in many ways, she implicitly trusts her advisors, who have done a tremendous job with her portfolio over the years.

In one of our discussions, Mary shared how much she enjoyed watching her stocks in the technology sector grow and outpace her core portfolio. This led me to suggest a conversation with her financial planner to discuss the advantages of giving appreciated securities.

Her advisor is also a Registered Investment Advisor (RIA), so during their annual review, he found an opportunity with a block of stock originally valued at $12,500, now worth $50,000. She intended to sell the stock and donate the proceeds to the College of Journalism. We were able to show her the negative implications of giving this way:

• If she sold the stock first, she would incur $8,625 in federal long‑term capital gains and net investment income tax (3%) plus $1,000 in state tax income tax, leaving only $40,375 to donate.
• If she donated the appreciated shares directly, she would have zero capital gains tax, and the university would receive the full $50,000.

This was the light-bulb moment: the tax‑smart option also made the largest charitable impact.

Tax Benefit & Efficiency Comparison — $50,000 Gift of Appreciated Stock (Basis $12,500)

To enhance the strategy further, after donating the appreciated securities, the advisor suggested Mary use the cash she originally planned to donate to repurchase new shares at today’s price. This “charitable swap” keeps her investment position exactly where she wants it while resetting the cost basis, reducing embedded gains, and improving long‑term tax efficiency.

Why This Strategy Matters for Wealth Advisors

Many high‑net‑worth clients want to do more with their giving but often are not aware of just how much more powerful a gift can be when it is made with appreciated assets instead of cash. Advisors can deliver tremendous value by showing clients how to give in a way that feels generous and financially smart at the same time.

Key Advisor Insights

1. Appreciated securities create a “double benefit.”
   When clients donate long‑term appreciated stock, they avoid capital gains tax and receive a deduction for the full fair‑market value of the gift. It is one of the rare moments in tax planning where everyone wins – the donor, the advisor’s planning objectives, and the charitable organization.
2. A charitable swap helps clients keep their portfolio intact.
   Donating appreciated shares and then repurchasing new shares allows clients to maintain their exact investment position while resetting their cost basis to today’s market value. In Mary’s case, she effectively eliminated $37,500 of embedded gains while keeping her portfolio allocation right where she wanted it.
3. It is a natural way to ease concentrated or out‑of‑balance positions.
   Clients who have accumulated too much of one holding, through employer stock, inheritance, or years of growth, can use charitable gifts to strategically reduce that concentration.
4. The strategy integrates seamlessly into broader planning.
   Whether a client is focused on multi‑year giving, building a donor‑advised-fund, or shaping a long‑term legacy plan, appreciated securities fit neatly into nearly every charitable giving strategy.

When This Strategy Works Best

This strategy really shines in a handful of common situations. It is especially powerful when a client holds highly appreciated assets. The bigger the gain compared to the original cost, the greater the potential tax benefit, just like Mary’s stock that had grown nearly 300%. This effectively converted unrealized appreciation into a deductible charitable contribution while bypassing recognition of long‑term capital gain entirely.   

It is also a great fit for clients who give every year because they can use this approach as part of their regular charitable giving routine rather than as a one‑time tactic.

And while many people think of this as a year‑end strategy, it is actually useful all year long. And if you are already planning to rebalance the portfolio, it is a smart, tax-friendly way of allowing clients to reduce overweight positions while putting their generosity to work in the most efficient way possible.

One Big Beautiful Bill Act Considerations (2026 and Beyond)

The One Big Beautiful Bill Act (OBBBA) introduces a few significant changes starting in 2026 that will shape how clients approach charitable giving. For itemizers, OBBBA adds a new 0.5% AGI floor, which means the first 0.5% of AGI in charitable deductions will not generate any tax benefit. It also introduces a 35% benefit cap, limiting the value of itemized charitable deductions to 35% of the deduction amount, regardless of the client’s marginal tax rate. Additionally, the previously temporary 60% AGI limit for cash gifts to public charities was made permanent.

For gifts of appreciated securities, these rules create some notable planning opportunities. Consider a donor who has $500,000 in AGI. Under the new 0.5% floor, the first $2,500 of his charitable deductions will not provide a tax benefit. His $50,000 stock gift easily clears that hurdle, but the 35% benefit cap limits his maximum deduction value to $17,500 (35% × $50,000), even though he is in the 37% bracket.

Here is where the strategy continues to shine: he still avoids $8,925 in capital gains tax by donating the appreciated stock instead of selling it. That savings is completely untouched by OBBBA.

The bottom line under the new rules is simple: avoiding capital gains tax becomes an even more important part of the overall planning picture. When deduction benefits are capped, the relative value of the capital gains savings grows. And for clients who want to maintain their investment positions, a charitable swap, donating appreciated shares and repurchasing with cash, remains a more efficient way to structure giving under the new rules.

When advisors combine charitable intent with tax‑efficient planning, generosity multiplies. By helping clients donate appreciated securities, it empowers them to maximize charitable impact, minimize tax exposure, and strengthen their financial plan.

Mary is pleased that her donation is working even smarter for both the university and her own financial future. She has enjoyed the benefits of a fully integrated wealth management team that now includes philanthropic organizations/personnel. As part of our continued collaboration, our next goal is to maximize her IRA Qualified Charitable Distributions.

The UF Foundation (federal tax ID number 59-0974739) is a Florida nonprofit organization exempted from federal income tax as a 50l(c)(3) publicly supported charity. The UF Foundation does not provide legal, tax or financial advice. When considering planning matters, seek the advice of your own legal, tax or financial professionals.