Tax Breaks for Contributions of Appreciated Property
by Julian Block
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.
In this article
- A Deduction for All Taxpayers
- Concerns and Complications
- Additional Requirements and Pitfalls
- Sell, Don’t Donate, Investments With Losses
Share this article
Facebook
Twitter
E-mail
SeekingAlpha
Stumbleupon
Delicious
LinkedIn
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.
For 2012, the top rate for long-term capital gains is 15% for individuals in income tax brackets of 25% or higher (taxable income above $70,700 for married taxpayers filing joint returns and above $35,350 for single filers). The rate is 0% this year for individuals in the two lowest income tax brackets of 15% and 10% (taxable income below $70,700 for joint filers and below $35,350 for single filers). The top rates of 15% and 0% apply through 2012. Add to Uncle Sam’s take whatever his nephews and nieces exact for taxes at state and local levels.
To read more, please become an AAII Registered User or CLICK HERE.
Discussion
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.
posted about 1 year ago by Ann from California
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
posted about 1 year ago by Charles from Illinois
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.
posted about 1 year ago by Douglas from Virginia
Do these same provisions apply to publicly traded partnerships? If not where are those rules in IRC?
posted about 1 year ago by Robert from Ohio
