Curious outcome, donations and cost basis, 8000%marginal rat

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TheGreyingDuke
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Joined: Fri Sep 02, 2011 10:34 am

Curious outcome, donations and cost basis, 8000%marginal rat

Post by TheGreyingDuke »

I made a two year contribution to Vanguard Charitable Foundation during 2013. When I enter it into TurboTax it asks me the cost of the donated asset. In round numbers:

The donated stock was valued at $58,452.

If I enter its cost value at $58,452 my tax liability (total) is $4402. But if I enter the cost value at $58,451 my tax liability goes to $12,218. Not sure what is going on here but I recall some limitations on appreciated donations but really, an 8000% marginal rate!
"Every time I see an adult on a bicycle, I no longer despair for the future of the human race." H.G. Wells
HouseStark
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Joined: Mon Oct 15, 2012 2:31 pm
Location: Minneapolis, MN

Re: Curious outcome, donations and cost basis, 8000%marginal

Post by HouseStark »

Is the donated asset properly categorized as a long-term capital gain property? There is a limit on the amount of deduction that can be taken of 30% of AGI. It doesn't make sense to me how that would cause such a leap, but maybe it has something to do with it.
jebmke
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Joined: Thu Apr 05, 2007 2:44 pm
Location: Delmarva Peninsula

Re: Curious outcome, donations and cost basis, 8000%marginal

Post by jebmke »

HouseStark wrote:Is the donated asset properly categorized as a long-term capital gain property? There is a limit on the amount of deduction that can be taken of 30% of AGI. It doesn't make sense to me how that would cause such a leap, but maybe it has something to do with it.
Hard to imagine it being LTG if the cost is equal to the FMV. Normally, the strategy is to bury the gains in the deduction. Not sure why OP is varying the cost or the FMV -- they are what they are. You can't just pick and choose what to report.
Stay hydrated; don't sweat the small stuff
billern
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Joined: Fri Dec 07, 2007 3:08 pm

Re: Curious outcome, donations and cost basis, 8000%marginal

Post by billern »

Print both versions of returns (either paper or pdf) and look at them side by side. You should be able to figure out what is going on with them when you do this.
Topic Author
TheGreyingDuke
Posts: 2217
Joined: Fri Sep 02, 2011 10:34 am

Re: Curious outcome, donations and cost basis, 8000%marginal

Post by TheGreyingDuke »

OP here...

Part of what seems to be happening is that if I show even $1 in gain I am subject to the 30% of AGI limit, effectively chopping over $11k in deduction. What is disallowed can be carried over to next year, but my strategy has been to make such contributions every third year or so, using the standard deduction otherwise.

In reference to an earlier comment, I was not trying to scam anything but I did not know the basis when I was filling out the form so was just trying on some numbers for size. I have learned the hard way that there is no good reason to bring the IRS into your life more than is required and fiddling with tax returns is like sending an engraved invite.
"Every time I see an adult on a bicycle, I no longer despair for the future of the human race." H.G. Wells
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