A major stock win is a big financial boon, but it can expose you to a sizeable tax bill when you rebalance your portfolio. Holding on to your stock indefinitely exposes you to concentrated risk, an unappealing prospect in today’s tumultuous market. But selling highly appreciated stock can mean losing 15%-20% or more in taxes, limiting the amount you can reinvest.

As longtime Forbes contributor William Baldwin pointed out recently, a charitable gift annuity from the Pomona Plan offers an excellent tax-wise solution.   

How the Pomona Plan Helps

When you transfer appreciated stock directly to fund a Pomona Plan charitable gift annuity, you:

• Do not pay capital gains tax at the time of transfer. Instead, a portion of the gain is avoided entirely while the balance of the gain is spread over a period of years and recognized as part of your annuity payments each year.
• Receive an immediate charitable income tax deduction in the year of the gift, based on the full fair market value and the charitable portion of the transfer.
• Obtain secure, fixed income for life. Payments do not fluctuate regardless of what the stock market does.
• Benefit from a portion of each payment being tax-free for a period of years, making your income more valuable than a fully taxable equivalent.

The Pomona Plan Advantage

Consider Juan, age 75, who holds $100,000 in stock with a cost basis of $10,000. If he sells outright, it would trigger approximately $13,500 in federal capital gains tax on the $90,000 gain (at the 15% long-term rate), leaving him just $86,500 to reinvest — with no deduction and continued market exposure.

By contributing the same stock to a Pomona Plan gift annuity, Juan would: 

• Avoid paying capital gains on the transfer, 
• Avoid a portion of the gain and recognize the balance over many years,
• Fund the annuity with the full $100,000 in value and receive a fixed annual payment of $7,600 for life, and
• Claim a charitable deduction of $34,636.