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Time to Review Your Portfolio and Plan Year-End Charitable Gifts

Posted December 2019

Despite a number of anxiety-inducing ups and downs, major stock market indices are at or near all-time highs. Now is the time to evaluate your stock holdings and create your year-end action plan.

Many who are charitably minded know that if they use stock to fund their charitable giving, they can take a deduction for the full fair-market value of stock held for more than one year—and avoid recognizing and paying tax on any appreciation in its value since it was purchased.

Here are some action steps to consider:

1. Check how long you have owned each stock (your “holding period”) and how its current value compares to your original investment.

2. Determine your assessment of future prospects for each stock. The more strongly you feel a stock may be at or near the end of an upward run, the more you may want to consider it to fund your charitable gift.

3. Don’t overlook the opportunity to increase your basis. Even if you are bullish on the future of a highly appreciated stock you own, don’t dismiss it too easily as a candidate to fund your giving. Consider giving the stock and then repurchasing the same amount of shares to reestablish your position with a new basis equal to the purchase price. Note: This, of course, will start a new holding period for the newly purchased stock.

4. Think about selling losers and giving the cash proceeds. If you have stocks that have gone down in value since you bought them, consider selling and using the cash proceeds to fund your charitable gifts. Your cash gift will generate a deduction, and any loss you realize on the sale can be used to offset gains—or, to a limited extent, to offset some ordinary income—resulting in additional tax savings.

Income-tax deductions for charitable gifts will produce savings proportional to the marginal tax rates of taxpayers who itemize deductions. However, you don’t have to itemize to benefit from avoiding capital-gain taxes.

We would welcome the chance to talk with you about charitable planning with your stock holdings.

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