The Best Present Ever: Give the Gift of Stock

Are you looking for a Christmas gift that lasts? Look no farther than your own stock portfolio.

It's the classic Christmas conundrum-what present should you give? Teddy bears, neckties, and iPods only go so far if you want the recipient to really appreciate what you're giving them. Cash is great in a last-minute pinch, but you know that they'll spend it on something forgettable.

Why not do both giver and receiver a favor and gift some stock instead? It's easier than you think-and better in the long-term.

Less tax, more joy

Chances are that you're sitting on a few shares that have gained a lot of value. Maybe you bought Starbucks in the 1990s, Microsoft 10 years earlier, or one of the railroads decades ago. Uncle Sam wants a cut of the profits when you cash those shares in.

But not if you give them away to a charitable organization. Hand a certificate over to the Salvation Army or Toys For Tots, and let them enjoy the price appreciation and dividends of your favorite investments. If you held the security for more than one year, you can deduct the full current value of your gift from your income taxes, up to 30 percent of your adjusted gross income. And, you don't pay any capital gains tax at all.

It's one of the biggest hustles you can give the taxman, actually-and it's perfectly legal. The charity, being a nonprofit organization, won't pay any taxes if it ever sells your gift, which keeps a whole lot of money out of Uncle Sam's hands.

It doesn't pay to donate losing stocks, because you don't get any special tax advantages. It usually makes more sense to sell that stock, take the capital loss to offset other gains, and send a check to charity, instead.

Gifting stock is simple

It's easy to sign over stock to someone else. If you have the actual paper certificate, simply sign it in the presence of a notary, and send it away. Deliver this valuable paper as safely as you can, either by hand, a trusted courier, or certified and insured mail. When you signed it, you essentially put it up for grabs.

Most brokerages don't send you certificates anymore. In that case, call your broker and ask to transfer the stock directly to the recipient of your gift. Then, it's a good idea to tell the party that the gift is coming. That's it--all done.

Charity begins at home

Charities aren't the only ones who deserve a gift that keeps on giving. You can use the same methods to transfer shares to your child's custodial account, your favorite aunt's IRA, or whomever else you choose. The tax benefits are almost as good this way, except that the target of your affections will probably pay capital gains taxes eventually.

It doesn't matter who you love this Christmas. Take stock of your devotion and share your wealth. It's the best way to keep you and the recipient of your gift smiling for years to come.