One of the hallmarks of an outstanding school is the size and impact of its endowment. Endowment funds distribute to the school, a steady stream of income that assists the school in reaching strategic goals and long-term improvements. All funds are used in accordance with the guidelines put in place when the fund was established.
An endowment fund is one in which the original principal is never used. The fund exists infinitely, with interest from the principal generating a steady stream of income for the school. For private schools, like Community Christian, a healthy endowment makes it possible to respond to advancements in technology, teacher retention, weather the up and downs of enrollment and provide financial aid for students who might otherwise be unable to afford a private education.
Example
Jim and Shirley have been faithful supporters of CCS. They purchased shares of ACME Corporation in 1985 at a cost of $3,000. Over this time, these shares appreciated and today are valued at $10,000. If they were to sell the stock and then give the proceeds to CCS, they would pay tax on their capital gain of $7,000 ($10,000 market value minus $3,000 original cost). If instead, they give the stock directly to CCS, they can claim a charitable deduction for the full market value of the gift ($10,000), and will not owe any capital gains tax on the transaction. CCS can then sell the stock and use all of the proceeds for our Endowment Fund.