Is it possible to gift long-term gain assets by selling first then writing a check?

dpill · #1 (**permalink**) 12-13-2016, 05:45 PM

Per the title, I have a taxable account invested in equity mutual funds. I have certain funds that are subject to capital gains. I know that I can donate shares to a charity however, this requires a medallion signature guarantee (which is a massive pain). I was wondering if it is possible to sell from the long-term gain position, refuse withholding, write a check to the charity, and then submit some type of IRS form to avoid long-term capital gains.

Let me know and thanks in advance for your help!

Wnhough · #2 (**permalink**) 12-14-2016, 03:00 AM

Quote:

Originally Posted by dpill

Per the title, I have a taxable account invested in equity mutual funds. I have certain funds that are subject to capital gains. I know that I can donate shares to a charity however, this requires a medallion signature guarantee (which is a massive pain). I was wondering if it is possible to sell from the long-term gain position, refuse withholding, write a check to the charity, and then submit some type of IRS form to avoid long-term capital gains.

Let me know and thanks in advance for your help!

no, you need to consider this;
One of the basics of good financial stewardship is charitable giving. You don't have to get out your checkbook (or, more likely, use your credit card) to be generous, however. It's possible for you to be savvy in your financial giving by providing the gift of stock shares.When you give investments, you can deduct the full value of the asset on your taxes and the charity gets the full benefit as well, since the recipient doesn't have to pay taxes on the gains if it decides to sell.you need to donate a winning investment.
Say you plan to donate $2kto the charity. You can donate cash and receive your tax deduction straight up. But if you also have some appreciating shares that you cansell for profit, say, You bought them 10 years ago for $1k, and now they are worth $2k. If you simply sell the shares, you have a capital gain of $1k. If you fall into a tax bracket where you pay the 15%capital gains tax rate, you will owe $150 in taxes on that gain. That tax bill will partially offset any benefit you received from donating cash to the charity.

But instead of donating the stock, you donate cash, then, You keep that $2kwould-be donation in your bank account and you transfer ownership of the shares to the charity. You get to claim the entire $2k as a deduction on your taxes, but you don't have to pay any capital gains tax.You receive the full deduction for a charitable contribution, and it isn't partially offset by your capital gains tax bill. This can be a great way to strategize at the end of the year if you have some appreciated shares you want to redeem, whether you are looking for cash, or whether you are trying to rebalance your portfolio.

dpill · #3 (**permalink**) 12-14-2016, 03:20 PM

Quote:

Originally Posted by Wnhough

no, you need to consider this;
One of the basics of good financial stewardship is charitable giving. You don't have to get out your checkbook (or, more likely, use your credit card) to be generous, however. It's possible for you to be savvy in your financial giving by providing the gift of stock shares.When you give investments, you can deduct the full value of the asset on your taxes and the charity gets the full benefit as well, since the recipient doesn't have to pay taxes on the gains if it decides to sell.you need to donate a winning investment.
Say you plan to donate $2kto the charity. You can donate cash and receive your tax deduction straight up. But if you also have some appreciating shares that you cansell for profit, say, You bought them 10 years ago for $1k, and now they are worth $2k. If you simply sell the shares, you have a capital gain of $1k. If you fall into a tax bracket where you pay the 15%capital gains tax rate, you will owe $150 in taxes on that gain. That tax bill will partially offset any benefit you received from donating cash to the charity.

But instead of donating the stock, you donate cash, then, You keep that $2kwould-be donation in your bank account and you transfer ownership of the shares to the charity. You get to claim the entire $2k as a deduction on your taxes, but you don't have to pay any capital gains tax.You receive the full deduction for a charitable contribution, and it isn't partially offset by your capital gains tax bill. This can be a great way to strategize at the end of the year if you have some appreciated shares you want to redeem, whether you are looking for cash, or whether you are trying to rebalance your portfolio.

I appreciate the reply and understand the value of donating the stock itself. That said, I was wondering if there was an easier way i.e. me just donate cash and then realize the capital gain since to transfer ownership of the stock I have to get a medallion signature guarantee - which is a pain. If not, that's fine but that's what I'm trying to find out.