Globe Spotlight report - Charity at home

Foundation tax primer
Private foundations win donors a name in the philanthropy world— and big tax breaks. It works like this:

John's annual income is typically about $4 million. In 2002, he sells part of his business, sending his income soaring to $50 million. He'd like to give some money to charity and to cut his tax bill. If he donates cash,the maximum deduction he can take is 30 percent of his income, or $15 million, so he decides to establish a $15 million foundation. TAX SAVINGS: $5.8 million
This year, John's income is back to $4 million. He decides to donate some appreciated stock to the foundation. He can deduct up to 20 percent from his income with a stock gift, or $800,000. So he donates stock worth $800,000 that he bought for $400,000, avoiding the capital gain. TAX SAVINGS: $369,000

SOURCE: Grant Thornton accountant Laura J. Kenney