Case Study: Charitable Gift Annuity Funded with Appreciated Assets


Gifting an appreciated asset to charity in exchange for a Charitable Gift Annuity (“CGA”) allows a donor to benefit charity, receive an income tax deduction, defer taxation on the appreciation, and enjoy a steady, lifetime stream of income.


Jada Bennett recently retired at age 65 and is looking forward to volunteering with her local hospital. She wants to make a significant gift to the hospital but needs to increase her annual income. She is considering selling an investment portfolio she bought 15 years ago, for $50,000, which has now appreciated to $200,000. The portfolio only pays dividends of two percent most years; sometimes it is as much as two and one-half percent, but not often. Jada could sell the portfolio, use some of the proceeds to purchase a fixed income investment, and donate the rest to the hospital. However, she knows she will pay capital gains tax of $22,500, which will deplete the amount remaining for investing and giving.

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