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Old 02-11-2018, 07:52 PM
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Tax lots for donated stock

I made a donation of stock to a charitable organization. In identifying the tax lots from my total position in the stock I made a mistake and allocated the donation to the highest cost rather than the lowest. When I contacted my brokerage firm they claimed that the IRS rules do not allow for any changes in tax lot allocation after the settlement date. I have searched the IRS site and have been unable to find anything about making changes. I have spoken to another brokerage firm and they told me that changes are possible on a one off basis. I assume this is not an uncommon mistake and there should be some allowance to correct an innocent ( STUPID!) mistake?
Any help would be appreciated
Thanks in advance



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Old 02-12-2018, 02:02 PM
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Generally, you may give away appreciated stock with a low tax basis and keep other stock with a high tax basis. It all depends on the tricky tax rules for charitable gifts of property. if you donate appreciated stock that would have produced a long-term capital gain if you had sold it i.e., you have owned the stock for more than 1 year, you can deduct the full fair market value of the stock on the date of the contribution.
However, if the stock gain would have been taxed at ordinary income rates had it been sold, your charitable deduction is limited to your basis in the stock. forExample , say,You acquired stock five years ago for $2k that is now worth $10k. If you donate the stock to charity, you can deduct an amount equal to the FMV, or $10k. There is no tax due on the $8k of appreciation.
If you have a choice between donating low-basis stock held more than 1 year and high-basis stock, it makes sense to donate the low-basis stock, absent any extenuating circumstances. Note that the tax advantages of donating low-basis stock will be accentuated if tax rates increase next year as expected.



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Old 02-12-2018, 02:24 PM
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Thanks for your response. My problem is I stupidly selected tax lots from my holding which had higher cost basis than others and wanted to change this. My brokerage firm claims the IRS code prevents any change in tax lot designation after the settlement date of a donation. I have been informed by the brokerage arm of a major bank that while the IRS frowns on such changes they are permissible.



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