Give it away?
Instead of selling their potentially taxable appreciated assets, benevolent clients might want to donate the shares to a qualified charity. The process can be a little tedious, but not much more than selling the asset, calculating the cost basis, incurring capital gains taxes and then writing a check.
If the appreciated asset is worth more than what the clients would like to donate right now, they should look at placing all they wish to get rid of into a donor advised fund (DAF).
Then they will receive a larger tax deduction in 2020, and can choose if and when to donate from the DAF in the future (albeit, without a tax break at the time of the distribution). In an ideal scenario, the clients could donate some of their appreciated assets to the DAF in 2020 and then sell another portion in the same year. They could then use the tax break received by the donation to the DAF to offset all of the tax cost incurred by selling the appreciated assets.
How a donor-advised fund works
Make a tax-deductible donation
Donate cash, stocks or non-publicly traded assets such as private business interests, cryptocurrency and private company stock to be eligible for an immediate tax deduction. A contribution to a donor-advised fund is an irrevocable commitment to charity; the funds cannot be returned to the donor or any other individual or used for any purpose other than grantmaking to charities.
Grow your donation, tax-free
While you’re deciding which charities to support, your donation can potentially grow, making available even more money for charities. Most sponsoring organizations have a variety of investment options from which you can recommend an investment strategy for your charitable dollars.
Support charities you love, now or over time
You can support virtually any IRS-qualified public charity with grant recommendations from the donor-advised fund—from your local homeless shelter to your alma mater or religious institution. The public charity sponsoring your account will conduct due diligence to ensure the funds granted go to an IRS-qualified public charity and will be used for charitable purposes.
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