Doubling Up: Charitable Contributions of Stock

Tax loss harvesting is a term investors use to describe the process of timing investment losses to offset taxable income. This is especially common at the end of any year. Another way to reduce taxable income is to donate stocks to an eligible charity. Most Americans donate cash to charities.

Philanthropists can also donate capital assets such as property, stocks, bonds, jewelry, coins or even vehicles. Gifting stocks is a way to double the benefits of philanthropy. By donating stocks or other property, donors potentially reduce income tax liability, plus avoid paying tax on the capital gain of the investment. The stock is transferred directly to the charitable organization. Wells Fargo Advisors gives nice breakdown of the potential tax benefits of giving stock versus cash.

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According the Internal Revenue Service (IRS) Publication 526, Charitable Contributions, stock donors must gift appreciated publicly traded stock, with a long-term holding period to organizations that are qualified to receive tax-deductible contributions. Gifts of appreciated publicly traded stock, with a long-term holding period, to public charities. Although donors can gift stocks with a short-term holding period or those held at a loss, more restrictions apply. Be sure to check IRS Publication 526 and your tax consultant for advice.

This communication does not provide tax or legal advice. Additional issues may exist that will affect Federal tax treatment of the transaction. The communication was not intended or written to be used, or relied upon by the reader or any other person to avoid federal tax penalties.

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