A Financial Revolution 


December 23, 2005
When Donating Stock, Donate Long-Term Gains
About this time every year, the personal finance magazines provide a number of tips on how to reduce your taxes. One of the tips that is often mentioned is donating appreciated assets. Basically, it works like this:

You bought 100 shares of ABC Corp in 2004 for $15 each ($1,500). The stock is now at $20 ($2,000). If you were planning to make a contribution to a charity, you can simply transfer some or all of the shares to the charity and, if you transferred all shares, take a $2,000 deduction without paying capital gains taxes.

While this is a great way to help out a charity, the magazines fail to tell you that this only applies to long-term capital gains. According to IRS Publication 526, any appreciated assets held less than a year are valued at the cost basis (i.e., you can't deduct the appreciation of the asset.)

While this is a useful strategy to help charities do their work and for you to cut your taxes, please be sure you understand the rules before making this move for tax reasons.

For some useful year-end tax tips:



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