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YEAR END PLANNING: GIVE IT UP!

December 04, 2006

To charity, that is. December sees a lot of charitable contributions. While strictly speaking charitable contributions aren't a good financial move - you give up a dollar to save maybe 42 cents in taxes - some ways of giving are more tax efficient.

Gifts of appreciated property are the most tax-efficient way to contribute to charity for most folks. If you give appreciated property, you can avoid paying tax on the appreciation, while still getting a tax deduction for the full appreciated value.

Like they say on the car ads, though, some restrictions apply. These include:

- Contributions of property valued at $5,000 or higher, except for publicly-traded securities, require a "qualified appraisl" and disclosure on Form 8283. No appraisal, no deduction.

- A new law requires donors of tangible personal property to "recapture" into income appreciation on the property if the charity sells it within three years of the date of gift. This rule applies to gifts after September 1, 2006.

- Strict new rules apply to facade easements and gifts of "taxidermy property."

In short, gifts of publicly-traded stock or mutual fund shares are the easiest.

If you are going to make such a gift, you ought to get on it. Sometimes charities, especially smaller ones, struggle with the paperwork on stock gifts. I've seen gifts fail to close before year-end because the charity didn't accept contributed stock in time. Starting now makes it easier for the charity to do its part.

 • 2006 year-end tax planning       Bookmark: del.icio.us • Digg • reddit