BERKELEY HEIGHTS, N.J. (TheStreet) -- As the year winds down, many affluent couples reach for their checkbook and send a cash contribution to a favorite charity, but investors should put down their checkbooks and review their investment portfolios, looking instead for highly appreciated publicly traded securities.

Donating securities to a qualified charity fulfills the charitable intent in a highly tax efficient manner. Corporate executives in particular can use this strategy to reduce overexposure to their employer's stock, especially if it is highly appreciated.

Donating securities to a qualified charity fulfills the charitable intent in a highly tax efficient manner.

There are rules governing donating highly appreciated securities, though. The charity must be a qualified charity under the tax code, for one thing, following rules at The securities must also have been held for a year or more, and the investors' charitable deduction is limited to 30% of their adjusted gross income when donating to a public charity, dropping to 20% of AGI for private charity donations.

If a person is above the AGI thresholds, the excess amount can be carried forward and used in future years, subject to the same AGI limitations.

Why is donating highly appreciated securities so tax efficient? The best way to illustrate is by example.

Assume a couple with $1 million in AGI contributes $50,000 in cash to the XYZ charity. They write their check and, when tax time rolls around, get an itemized deduction for their contribution. The tax benefit for their donation is realized at their effective tax rate.

Now assume the couple donates $50,000 worth of publicly traded stock they have held for 10 years. The couple's cost basis in the stock is $10,000. How is this treated? The couple would avoid paying capital gains on $40,000, since they did not sell the stock. Even better, they are still entitled to their itemized deduction.

In this situation they can take the whole deduction in the current year because it is below the 30% of AGI threshold. But wait -- it gets even better. When the charity sells the securities, there's still no capital gain, because of their tax-exempt status. This is a win-win situation for all involved.

When making year-end charitable contributions, don't automatically reach for your checkbook. Donating qualifying highly appreciated securities can be rewarding spiritually and taxwise.

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Michael Maye is the founder and president of MJM Financial Advisors, a registered investment advisory firm in Berkeley Heights, N.J. He is a member of the National Association of Personal Financial Advisors and has been a speaker covering tax topics at NAPFA's national and regional conferences. Maye has also been a frequent contributor to the Star Ledger of New Jersey's "Biz Brain" and "Get With the Plan" articles. In addition to NAPFA, he is a member of Financial Planning Association, American Institute of Certified Public Accountants, New Jersey State Society of CPAs and the Estate Planning Council of Northern New Jersey.