In their piece on end of year tax tips for the generous, Kiplinger gives an example why it's better to give appreciated securities (assuming you do not want to hold on to them any longer) rather than cash. Their thoughts:
When you give $1,000 in cash, you get to deduct $1,000, and that saves you $250 in the 25% bracket. (Any state-income-tax savings are gravy.) But let's say you have $1,000 worth of mutual fund shares that you bought more than a year ago for $500. If you sell the shares, you'll owe $75 in tax on the profit, even at the preferential 15% capital-gains rate. But if you donate the shares, the charity gets the full $1,000 (it doesn't have to pay tax on the profit when it sells), you avoid the $75 tax bill, and you still get to deduct the full grand. It's a win-win-win situation.
I used this strategy several years ago (before the market melt-down -- when I still had big gains on almost every fund) to consolidate funds/accounts. I knew I wanted to give a certain amount over the course of the year, so instead of taking it out of cash flow, I gave securities. After doing this for a few years, I had drastically decreased the number of investment accounts and funds I had to follow/track.
A word to the wise: giving this way can throw the charity for a loop since many aren’t used to receiving donations in this manner. I had to do some research (find the right person at the charity who knew how to receive the securities on their end) as well as fill out some specific paperwork from the mutual fund company to make these transactions work, but it was worth the effort.
Just wanted to give you a heads-up -- if you're thinking of giving this way, be sure to allow a few extra days to take the extra steps required. This is certainly not a strategy you can use at 11:59 pm on December 31st! ;-)