By Giving, She ReceivedToshiko, a widow, is 70 years old. She has been a loyal donor to Soka University of America since it was founded and hoped someday she would be able to make a large donation that would help further the mission of the university.
After the passing of her husband, Toshiko began to plan her financial future. One of the assets she owned was appreciated stock that she had purchased many years ago for $5,000 and was now worth almost $50,000. Toshiko discovered that she would lose a significant amount of the value of her stock portfolio if she sold it because of the capital gains taxes she would have to pay on the appreciation of $45,000.
Toshiko found a way to solve her tax problem while also making her dream of making a large donation to Soka University come true. She donated the appreciated stock to the university in exchange for fixed annuity payments for the rest of her life. She locked in an annual fixed income of $3,500 (based on a 7% annuity rate) for the rest of her life, which makes her feel safer financially. The annual annuity provides Toshiko with a larger annual income than the average annual dividends the stock produced of approximately $1,500. Additionally she got a charitable tax deduction based on the eventual value of the gift and avoided having to pay a hefty tax bill on the capital gains of the appreciated stock. Plus, a portion of her income stream from the annuity is tax-free.