The Blessings of Giving

Inflation has sent costs rocketing for colleges, religious groups and private charities, while heavy taxes have hit the private fortunes that were the sources of some of the biggest charitable gifts. But high taxes have had another effect: they have made it less costly for corporations to give to charity, thus reap large amounts of good will at cut-rate prices. Last week in a new book, Tax Planning for Foundations and Charitable Giving (Business Reports, Inc.; $12.50), Tax Experts J. K. (Your Income Tax) Lasser, William J. Casey and Walter Lord set forth how corporations and individuals can receive the most blessings by giving.

For giant companies like Ford, a charitable foundation can be used to keep control of the corporation in the family (i.e., by depositing nonvoting shares of stock in the corporation, thus cutting inheritance taxes while retaining the voting shares that control the company). But such devices, the book explains, are no longer the sole province of big corporations and rich families; they can be sound business practice for smaller companies or people with relatively modest fortunes. For example, a company in the top excess-profits bracket, which normally gives $500 a year to charity, can set up a $10,000 foundation this year at a net cost, after taxes, of $1,800. The return on the investment at 5% will take care of future charitable requests. But, based on scheduled tax reductions, setting up such a foundation in 1955 will cost the same company $5,300.

One of the newest wrinkles in philanthropy is the tax-deductible gift which also provides security for the giver in the form of a life income. A number of religious and educational institutions (Maryknoll Fathers, the Salvation Army, Dartmouth and Pomona Colleges, etc.) have based their fund-raising programs on this. The giver can often choose a fixed annuity based on his gift alone, or a life income based on average earnings of the institution's entire investment portfolio. Example: a man gave $10,000 worth of stock to Princeton Theological Seminary, but the actual cost to him, because of tax savings, was only $4,268.49. During the next ten years, the stock increased in market value to $16,369, and the man received $6,629 in income payments, or 50% more than the cost of his gift. After his death, the institution will have both the stock and its earnings.

Some rules for getting maximum tax deductions from gifts: P: Capital assets that have gone up in value should be given directly. The donor thus pays no tax on the capital gain, and he can take an income-tax deduction for the full value of the gift. P: Capital assets that have dropped in value should be sold, and the cash given to charity. Thus the donor deducts both a capital loss and the value of the gift from his tax bill.

P: Personal property that has declined in value might as well be given directly to the charity, since no capital losses can be taken for the sale of personal assets. P: Companies that have already given the full 5% allowed for corporate charitable contributions can make deals with a school or charity to provide services in return for a gift (research, scholarships for employees' children, etc.), thus charge off the extra contribution as a business expense.

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