ESPP Charitable Donation Tax Question

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AwesomeA
Posts: 10
Joined: Mon Apr 07, 2014 11:39 am

ESPP Charitable Donation Tax Question

Post by AwesomeA » Mon Dec 02, 2019 7:06 am

We pay 10% tithing to our church each year. We had been planning to pay our tithing through donating some ESPP stock as an in-kind donation. The stock has more than doubled since we bought it at the discounted price a few years ago. However, my brother told us that the donation will be treated from as tax standpoint as if the the stock was sold and then donated, thus not helping us avoid paying taxes on the gains. My brother said they changed the tax rules a few years ago closing this loophole to avoid taxes on ESPP stock. Is he correct?

willyd123
Posts: 141
Joined: Mon Feb 19, 2018 7:23 am

Re: ESPP Charitable Donation Tax Question

Post by willyd123 » Mon Dec 02, 2019 7:56 am

AwesomeA -

This is a great question. I did some research and I could not find a clear answer. But I believe you would consider this donation as two components - 1. the discount portion of the gain and 2. the remaining amount of the gain.

For the discount portion, I believe that you need to always report this as ordinary income to be taxed as such. I think you should check to be sure your employer has not already reported the discount portion as ordinary income on your W-2. My assumption is that your employer has NOT done this because you have held the shares for the requisite holding periods. And I believe this component would be considered a charitable contribution on your tax return.

Then with regards to the remaining portion of the gain, I believe that if you've held the shares for at least two years after offering date and one year after exercise date, then the remaining gain is long term capital gain and typically a stock that is contributed that has been held at least one year and therefore would be eligible for long-term capital gains treatment would be "donatable" with no tax consequences to the donor (other than a deduction for the FMV of that portion). The question that I know you are trying to answer but that I am unfortunately not certain of is whether this portion is treated differently just because it is ESPP stock.

Not sure if the above is helpful at all. Hopefully another BH will know for sure.

https://turbotax.intuit.com/tax-tips/in ... /L8NgMFpFX

SRenaeP
Posts: 957
Joined: Tue Jan 19, 2010 9:05 pm

Re: ESPP Charitable Donation Tax Question

Post by SRenaeP » Mon Dec 02, 2019 8:55 am

I have no direct knowledge. However, a quick search pulls up this article from 2018. It appears that ESPP donations are treated like any other stock donation provided you have met the special holding period (more than two years from grant and one year from exercise/purchase).

https://www.forbes.com/sites/brucebrumb ... 81c82fcb3a

Topic Author
AwesomeA
Posts: 10
Joined: Mon Apr 07, 2014 11:39 am

Re: ESPP Charitable Donation Tax Question

Post by AwesomeA » Tue Dec 03, 2019 7:42 am

Thank you for the replies! Since there were no definitive answers, I think I'll contact our tax accountant and ask. I'll post here after I find out.

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