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Tax Breaks for Contributions of Appreciated Property

by Julian Block

Tax Breaks For Contributions Of Appreciated Property Splash image

When we contribute to our favorite charities, most of us go the easiest, most familiar route and simply write checks or use credit cards. We receive income tax deductions; the charitable organizations receive money.

But donors who want to make major gifts and also lose less to the Internal Revenue Service should familiarize themselves with other, often-overlooked ways to fund philanthropies. One option that allows the charitably inclined to realize significant tax benefits is to donate appreciated properties that have been owned for more than 12 months and that will be taxed as long-term capital gains when sold. Some common examples of investments that might fit this profile are shares of individual stocks, mutual funds and exchange-traded funds (ETFs); bonds; and real estate.

The “give ’em away” gambit permits contributors of appreciated assets to deduct their full market value when donated. Savvy benefactors also avoid all of the federal and state taxes assessed on profits realized from sales of investments, effectively decreasing the cost of donations. But if the investors sell their holdings first and then donate the cash proceeds, the IRS will pocket a chunk of the profits.

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Julian Block is an attorney and author based in Larchmont, New York. For information about his books, visit www.julianblocktaxexpert.com.


Discussion

Ann from California posted over 2 years ago:

How can I calculate the maximum to donate in appreciated mutual funds to our private medical foundation for 2011?

The New Year's holiday prevented any mutual fund settlement between Dec. 29 and Jan 4-6.
Will the IRS therefore refuse to allow our donation on Dec. 29?

The current issues of AAII on taxes are great.


Charles from Illinois posted over 2 years ago:

Ann, as Julian stated in his article, the IRS uses the settlement date to determine what year the investment was transferred. Since you are donating to a private medical foundation, you may want to speak to a tax professional to confirm that this rule still applies. -Charles Rotblut


Douglas from Virginia posted over 2 years ago:

There are, or used to be, special deals for people who gave extraordinary amounts in terms of their income/assets. I have a friend who is contemplating a gift that might qualify.

Can anybody give us some info or pointers to the appropriate regs.


Robert from Ohio posted over 2 years ago:

Do these same provisions apply to publicly traded partnerships? If not where are those rules in IRC?


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