Tax help - DAF contribution

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Dogsbestfriend
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Tax help - DAF contribution

Post by Dogsbestfriend » Mon Jan 29, 2018 9:09 pm

Hello,

Working on taxes using TurboTax. I opened a DAF at VG Charitable at the end of 2017 and funded it using donated shares from my taxable account. Entering the data into TurboTax, it asks for the cost basis of the donated shares, which did not show up on any of the documents I received from Vanguard. So I sent an inquiry to Vanguard and got the following as part of the response:

"Upon review of your account, the transfer of shares was made to a Donor Advised Fund (DAF), an account type that is not gift eligible. The cost
basis for any shares transferred to the DAF will be the original cost basis and is carried over to the new account. This type of transfer does not
create a taxable event for the donor."


I'm confused and concerned. Did I do something wrong in funding the DAF rendering it impossible to write it off as a tax deduction? Thanks in advance for any clarification.

DBF

livesoft
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Re: Tax help - DAF contribution

Post by livesoft » Mon Jan 29, 2018 9:34 pm

I don't know about Vanguard's response, but you should read the IRS instructions to understand what is going on and not rely on TurboTax to explain things to you. See IRS Publication 526 and the Instructions to Schedule A and instructions to Form 8283.

You may be thinking, "I bought TurboTax so I would not have to read the IRS instructions nor worry about any forms." Well, that just ain't a good way to think about it.

Oh, you did nothing wrong.
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TheAncientOne
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Re: Tax help - DAF contribution

Post by TheAncientOne » Mon Jan 29, 2018 9:41 pm

The cost basis is the fair market value on the day you donated the shares. You should be receiving Form 8283 from Vanguard that provides you with this information. At least that's what Fidelity did when we donated appreciated shares to our account.

TheAncientOne
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Re: Tax help - DAF contribution

Post by TheAncientOne » Mon Jan 29, 2018 9:42 pm

Oops, upon reading this again, I'm confused. Did you contribute shares out of 401K or IRA account?

RudyS
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Re: Tax help - DAF contribution

Post by RudyS » Mon Jan 29, 2018 10:09 pm

TheAncientOne wrote:
Mon Jan 29, 2018 9:42 pm
Oops, upon reading this again, I'm confused. Did you contribute shares out of 401K or IRA account?
OP said taxable.

Iorek
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Re: Tax help - DAF contribution

Post by Iorek » Mon Jan 29, 2018 10:14 pm

This is not tax advice, but IIRC you only need the basis if you owned the shares for less than a year. That said, I would just call VG again and ask.

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FiveK
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Re: Tax help - DAF contribution

Post by FiveK » Tue Jan 30, 2018 6:06 am

Dogsbestfriend wrote:
Mon Jan 29, 2018 9:09 pm
Working on taxes using TurboTax. I opened a DAF at VG Charitable at the end of 2017 and funded it using donated shares from my taxable account. Entering the data into TurboTax, it asks for the cost basis of the donated shares....
Instructions for Form 8283 (Rev. December 2014) - i8283.pdf notes:
Column (g). Do not complete this column for property
held at least 12 months or publicly traded securities. Keep
records on cost or other basis.

For whatever reason, TT completes it anyway. The cost basis is whatever you would have used if you sold the shares instead of donating them.

IowaFarmBoy
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Re: Tax help - DAF contribution

Post by IowaFarmBoy » Tue Jan 30, 2018 6:33 am

As long as they were long-term (held for a year), they should be deductible. That answer from Vanguard sounds wrong. Did you talk to a general rep or a rep from the DAF area?

As far as TurboTax, I've noticed that it (along with other tax software) will occasionally ask for information that is not actually needed. They generally show it on a worksheet somewhere but not always. I find it helpful to look at the forms it is producing and see how/if it is used on anything going to the IRS.

ivk5
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Re: Tax help - DAF contribution

Post by ivk5 » Tue Jan 30, 2018 6:40 am

I didn't see specific reference in OP to long-term gains.

Is it possible you mistakenly contributed shares with <1y holding period? To the extent that you did, your deductible charitable contribution would be limited to your basis for those shares.

Iorek
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Re: Tax help - DAF contribution

Post by Iorek » Tue Jan 30, 2018 8:05 am

IowaFarmBoy wrote:
Tue Jan 30, 2018 6:33 am

As far as TurboTax, I've noticed that it (along with other tax software) will occasionally ask for information that is not actually needed. They generally show it on a worksheet somewhere but not always. I find it helpful to look at the forms it is producing and see how/if it is used on anything going to the IRS.
This is one reason I still print out my return and mail it in, but I recognize that makes me a bit of a dinosaur.

RudyS
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Re: Tax help - DAF contribution

Post by RudyS » Tue Jan 30, 2018 11:15 am

Iorek wrote:
Tue Jan 30, 2018 8:05 am
IowaFarmBoy wrote:
Tue Jan 30, 2018 6:33 am

As far as TurboTax, I've noticed that it (along with other tax software) will occasionally ask for information that is not actually needed. They generally show it on a worksheet somewhere but not always. I find it helpful to look at the forms it is producing and see how/if it is used on anything going to the IRS.
This is one reason I still print out my return and mail it in, but I recognize that makes me a bit of a dinosaur.
Almost a dinosaur, but I do print the return to look it over, and compare to previous year. But then I let TT efile. Less chance for transcription errors at IRS data center.

inbox788
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Re: Tax help - DAF contribution

Post by inbox788 » Tue Jan 30, 2018 12:10 pm

ivk5 wrote:
Tue Jan 30, 2018 6:40 am
I didn't see specific reference in OP to long-term gains.

Is it possible you mistakenly contributed shares with <1y holding period? To the extent that you did, your deductible charitable contribution would be limited to your basis for those shares.
Yes, how long ago did you purchase the shares that were donated?
Did Vanguard give you a Form 8283?
If you enter $0 or the total amount of the donation as the cost basis, does it alter your return? If it doesn't, don't worry about it, just put down whatever cost basis you have. I'm guessing it's a number that is being collected (and thrown away?) but isn't being used. I've used zero or left cost basis blank before when I lost the cost basis and since it doesn't alter the calculations.

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Artsdoctor
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Re: Tax help - DAF contribution

Post by Artsdoctor » Tue Jan 30, 2018 3:26 pm

Dogsbestfriend wrote:
Mon Jan 29, 2018 9:09 pm
Hello,

Working on taxes using TurboTax. I opened a DAF at VG Charitable at the end of 2017 and funded it using donated shares from my taxable account. Entering the data into TurboTax, it asks for the cost basis of the donated shares, which did not show up on any of the documents I received from Vanguard. So I sent an inquiry to Vanguard and got the following as part of the response:

"Upon review of your account, the transfer of shares was made to a Donor Advised Fund (DAF), an account type that is not gift eligible. The cost
basis for any shares transferred to the DAF will be the original cost basis and is carried over to the new account. This type of transfer does not
create a taxable event for the donor."


I'm confused and concerned. Did I do something wrong in funding the DAF rendering it impossible to write it off as a tax deduction? Thanks in advance for any clarification.

DBF
Their response isn't entirely clear but then again, your initial question isn't clear either.

When you made a contribution to your DAF, it's the market value of the contribution that matters. The cost basis is irrelevant to them. In another words, if you donate $5,000 to your DAF, the deduction you'll take is $5,000. The DAF doesn't really care how old the asset is either. They will take essentially anything from you.

It's up to you to figure out how to play it from a tax point of view. For example, you'd only want to donate appreciated funds which have long-term gains. If you've donated appreciated assets with short-term gains, the DAF will still take them, but you will be taxed on the transfer (i.e., the short-term gain is taxed as income). It's up to you to declare that, not up to the DAF; this is why Turbo Tax wants to know the date and amount you purchased those shares for. It's essentially a safety net for you; TT will not allow you to take the donation of short-term gains without paying tax on them.

If you donated appreciated Vanguard shares, you probably remember that when you were in the Vanguard Charitable site, when it came time to donate appreciated assets from Vanguard, the Charitable site then took you to the Vanguard site to choose the fund (and presumably the shares) to donate. It's your responsibility to know the shares (the date, the amount, etc.) and to enter to information in your software program.

I don't think you "did anything wrong." However, there are two maneuvers you'd want to avoid when donating shares to your DAF. You should not donate short-term assets because it is essentially a short-term capital gain. You should not donate shares which have a loss; you'd want to sell them first, clock the loss, and then donate that cash (if you suits your timing).

Dogsbestfriend
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Re: Tax help - DAF contribution

Post by Dogsbestfriend » Tue Jan 30, 2018 8:14 pm

Thanks all for the responses. I made the decision to open a DAF under what I felt was a time crunch, so I likely did not do my due diligence when setting it up. Specifically, my VG account is set up as specific lot ID, and my intent when I donated the shares was to donate the most appreciated/longest held shares. Certainly not shares held short term or at a loss. However, I don't recall actually being able to select exactly which shares were transferred, and now I have no record of which shares I donated. Just the date, total number of shares, and value on that date. I called Vanguard again today and the rep told me that they do not keep any record of that information and cannot tell me exactly which shares were donated, and suggested that I call Vanguard Charitable to get that information. I do not expect them to have it though because as Artsdoctor said, the DAF will accept anything and it's not up to them to figure out the cost basis for me. For now I am assuming the donated shares were all held long term, but would like to figure it out for certain 1) for my own records, and 2) so I know how to keep better track of it the next time I donate shares.

livesoft
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Re: Tax help - DAF contribution

Post by livesoft » Tue Jan 30, 2018 8:19 pm

Your taxable account at Vanguard should have a record of shares that left your account ... no matter what the Rep told you

Please go look at your online account and look. Click on the "Cost basis" tab for your mutual fund. When you do that a new set of tabs appears. Here is a link to a screen capture showing 3 tabs included one that says "Gifted shares":
viewtopic.php?p=2721237#p2721237

You should find something similar when you look. What did you find?
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Dogsbestfriend
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Re: Tax help - DAF contribution

Post by Dogsbestfriend » Tue Jan 30, 2018 8:47 pm

Livesoft,
Thanks again for your response. That's the screen I originally checked, expecting to find the info. I just checked it again -- there is nothing under the "gifted shares" tab except the following note: "You don't have any gifts of shares from your account at this time. Making a gift of shares is simple and can play an important role in your tax planning. Interested in gifting shares? Select the appropriate gifting information kit on the right side of this page to get started." (Yes, I checked for both 2017 and 2018 just in case there was a delay in posting the information). Also nothing under the "realized gains & losses" tab.
DBF

livesoft
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Re: Tax help - DAF contribution

Post by livesoft » Tue Jan 30, 2018 8:55 pm

OK, under the "Unrealized gains & losses" tab, do you see that shares that you thought you had are gone?

Do you have another account that you may have accidentally donated shares from?
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livesoft
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Re: Tax help - DAF contribution

Post by livesoft » Tue Jan 30, 2018 9:02 pm

You should be able to go to the "Transaction history" tab and set the "Transaction types" to "Transfer" and "Update Table" to see only the Transfers:

Image
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inbox788
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Re: Tax help - DAF contribution

Post by inbox788 » Tue Jan 30, 2018 9:15 pm

Dogsbestfriend wrote:
Tue Jan 30, 2018 8:47 pm
Livesoft,
Thanks again for your response. That's the screen I originally checked, expecting to find the info. I just checked it again -- there is nothing under the "gifted shares" tab except the following note: "You don't have any gifts of shares from your account at this time. Making a gift of shares is simple and can play an important role in your tax planning. Interested in gifting shares? Select the appropriate gifting information kit on the right side of this page to get started." (Yes, I checked for both 2017 and 2018 just in case there was a delay in posting the information). Also nothing under the "realized gains & losses" tab.
DBF
You're saying there's a transaction of the shares leaving your Vanguard account, but no record when you look at the cost basis only? What is the type of transaction recorded and what are the details?
Check that you have Spec ID as cost basis method and not some average or FIFO/LIFO.
Last edited by inbox788 on Tue Jan 30, 2018 9:18 pm, edited 1 time in total.

Dogsbestfriend
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Re: Tax help - DAF contribution

Post by Dogsbestfriend » Tue Jan 30, 2018 9:18 pm

Yes, that's what I am saying. I have confirmation of the date, number, and value of shares leaving the account, and confirmation of receipt by the DAF, but no record under cost basis. Yes, I have Spec ID as cost basis method.

inbox788
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Re: Tax help - DAF contribution

Post by inbox788 » Tue Jan 30, 2018 9:20 pm

Dogsbestfriend wrote:
Tue Jan 30, 2018 9:18 pm
Yes, that's what I am saying. I have confirmation of the date, number, and value of shares leaving the account, and confirmation of receipt by the DAF, but no record under cost basis. Yes, I have Spec ID as cost basis method.
What about the Show Details of the actual holdings and the Date acquired for the remaining lots? Are any missing (especially recently bought ones)? Anything under Realized gains and losses? Be sure you're looking at the right year.

If this is a deficit in the Vanguard recording, then there's not much you can do. Maybe just print out a transaction report of the purchase of the fund that's long term and report it as such.

Pigeye Brewster
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Re: Tax help - DAF contribution

Post by Pigeye Brewster » Tue Jan 30, 2018 10:44 pm

Dogsbestfriend wrote:
Tue Jan 30, 2018 9:18 pm
Yes, that's what I am saying. I have confirmation of the date, number, and value of shares leaving the account, and confirmation of receipt by the DAF, but no record under cost basis. Yes, I have Spec ID as cost basis method.
Are some of your shares noncovered? They are accounted for at average cost even when using SpecID.

A Vanguard rep previously told me that noncovered shares don't show up under the "Gifted shares" tab.

I have both noncovered and covered (using SpecID). My DAF donations were taken out of the noncovered shares, which was what I wanted because they were the lowest cost.

Nutmeg
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Re: Tax help - DAF contribution

Post by Nutmeg » Tue Jan 30, 2018 11:01 pm

OP--You might find this summary to be helpful:

https://www.bogleheads.org/wiki/Specifi ... _of_shares

Pigeye Brewster stated that noncovered shares are accounted for at average cost even when using specific ID. While It might be true that a mutual fund would account for them at average cost, I don't think that that means that you have to use average cost when computing basis as long as you have taken the other steps needed to specifically identify the shares transacted; if that were the case, it would defeat the purpose of specific ID.

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Re: Tax help - DAF contribution

Post by Pigeye Brewster » Wed Jan 31, 2018 12:13 am

Nutmeg wrote:
Tue Jan 30, 2018 11:01 pm
OP--You might find this summary to be helpful:

https://www.bogleheads.org/wiki/Specifi ... _of_shares

Pigeye Brewster stated that noncovered shares are accounted for at average cost even when using specific ID. While It might be true that a mutual fund would account for them at average cost, I don't think that that means that you have to use average cost when computing basis as long as you have taken the other steps needed to specifically identify the shares transacted; if that were the case, it would defeat the purpose of specific ID.
Good point. I should have been more clear. I was referring to how Vanguard handles noncovered shares since the OP indicated they were looking for the cost basis on their Vanguard account online.

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Re: Tax help - DAF contribution

Post by Nutmeg » Wed Jan 31, 2018 2:48 am

Pigeye Brewster wrote:
Wed Jan 31, 2018 12:13 am
Nutmeg wrote:
Tue Jan 30, 2018 11:01 pm
OP--You might find this summary to be helpful:

https://www.bogleheads.org/wiki/Specifi ... _of_shares

Pigeye Brewster stated that noncovered shares are accounted for at average cost even when using specific ID. While It might be true that a mutual fund would account for them at average cost, I don't think that that means that you have to use average cost when computing basis as long as you have taken the other steps needed to specifically identify the shares transacted; if that were the case, it would defeat the purpose of specific ID.
Good point. I should have been more clear. I was referring to how Vanguard handles noncovered shares since the OP indicated they were looking for the cost basis on their Vanguard account online.
OK; I think we agree on that!

OP--I looked online at how Vanguard handled my transfer of shares to Vanguard Charitable. I had both covered and uncovered shares, and they don't show under "gifted shares" on the cost basis screen, but they appear on the transaction history screen as transfers, and when I click on the entry for the transfer for more details, it shows "charitable contribution."

fundseeker
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Re: Tax help - DAF contribution

Post by fundseeker » Wed Jan 31, 2018 7:33 am

OP, FWIW, I donated shares to my new Fidelity DAF at year end, and under "Cost basis summary," then "Gifted shares," VG shows my basis for the donated noncovered shares at avg cost with a purchase date in 2009. So, that is where it should appear, or at least it did for mine. Good luck! But does it really even matter, except for determining the basis of the remaining shares?

Pigeye Brewster
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Re: Tax help - DAF contribution

Post by Pigeye Brewster » Wed Jan 31, 2018 4:28 pm

fundseeker wrote:
Wed Jan 31, 2018 7:33 am
OP, FWIW, I donated shares to my new Fidelity DAF at year end, and under "Cost basis summary," then "Gifted shares," VG shows my basis for the donated noncovered shares at avg cost with a purchase date in 2009. So, that is where it should appear, or at least it did for mine. Good luck! But does it really even matter, except for determining the basis of the remaining shares?
I have gifted noncovered shares direct to my church for a few years and none of those ever showed up under "Gifted shares". So I finally asked a Vanguard rep about it and was told it was because they were noncovered.

The same thing with the shares transferred to my new Fidelity DAF last year. No "Gifted shares".

Noncovered shares are definitely classified as long-term gain shares, so I wholeheartedly agree with you that it doesn't really matter.:beer

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sleepysurf
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Re: Tax help - DAF contribution

Post by sleepysurf » Wed Jan 31, 2018 6:34 pm

Dogsbestfriend wrote:
Tue Jan 30, 2018 8:47 pm
... there is nothing under the "gifted shares" tab except the following note: "You don't have any gifts of shares from your account at this time. Making a gift of shares is simple and can play an important role in your tax planning...
I was having the same issue, with "Gifted" shares to a new Vanguard DAF not showing up on that tab, while "Gifted" shares earlier in the year to a Fidelity DAF were listed! I asked my Flagship Rep to investigate, and she found the answer. If Vanguard Charitable "pulls" funds from a Vanguard Brokerage Account, they will not show up in the "gifted" tab (due to the way their software works). However, if Vanguard funds are "pushed" to the DAF (as I did when opening my Fidelity DAF), they will show up in the "Gift" tab. It's really a moot point, as long as you have appropriate documentation for the IRS of the date you initiated the DAF transfer, and value of the shares.
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Artsdoctor
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Re: Tax help - DAF contribution

Post by Artsdoctor » Fri Feb 02, 2018 10:17 am

When you're making a contribution while on the Vanguard Charitable website, it'll ask you where you want to take the money from. If you want to donate Vanguard shares from your Vanguard taxable account, you'll be taken to your Vanguard website, having to log on to that site. You'll then pick what you want to donate.

There will not be a record of the contribution listed under Gifted Shares. If you click on the fund you've used, there will be a short history of everything pertaining to that fund (dividends, sales, and "transfer", which is what you're looking for). If you click on the date of the transfer, the information will be there.

If you can't find the information that way, then go back to the holding itself (you would click on the name of the fund). You will find a "Cost Basis Summary". Click on that and you'll see your funds. Pick the fund from which you donated, and then click on "Show Details." It will tell you if you have non-covered shares, and it will also confirm the cost basis method you've chosen. If you've indeed chosen SpecID, you will find your specific shares. You can then reconcile what Vanguard has with what you have. It's possible that you donated noncovered shares and if that is the case, it's up to you to list your cost basis (Vanguard uses Average Cost but you don't have to).

For what it's worth, whenever you're logged on to your taxable account and are about to make any transaction whatsoever, you need to take a step back, read the confirmation, and re-read it again. Every transaction in your taxable account is a taxable event and the only mistakes I've ever made in
my taxable accounts were made in haste.

Dogsbestfriend
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Re: Tax help - DAF contribution

Post by Dogsbestfriend » Mon Feb 05, 2018 5:12 pm

Thank you all for the responses. I have all noncovered shares. But I did "pull" the shares via the VG Charitable site rather than "push" from my VG account, so Vanguard does not maintain a record of the basis, which is surprising. But as Livesoft and others suggest, it doesn't matter for the purposes of tax filing and is just collection of superfluous information by the tax prep software.

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Artsdoctor
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Re: Tax help - DAF contribution

Post by Artsdoctor » Fri Feb 09, 2018 4:00 pm

Dogsbestfriend wrote:
Mon Feb 05, 2018 5:12 pm
Thank you all for the responses. I have all noncovered shares. But I did "pull" the shares via the VG Charitable site rather than "push" from my VG account, so Vanguard does not maintain a record of the basis, which is surprising. But as Livesoft and others suggest, it doesn't matter for the purposes of tax filing and is just collection of superfluous information by the tax prep software.
Just one clarification. It actually DOES matter for tax filing, just not right now. If you have non-covered shares, that means that Vanguard will not report the basis to the IRS when a sale occurs. However, YOU actually have to report it when a sale occurs. So it does matter which shares you contributed to Vanguard Charitable now because you'll most likely need to keep track of the remaining non-covered shares when you sell some of them later (since Vanguard will not do that for you).

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Re: Tax help - DAF contribution

Post by livesoft » Fri Feb 09, 2018 4:02 pm

If Average Cost was the cost basis method and there was no specific mention of which shares to contribute, then the first shares in were the shares contributed. Actually, there was probably no way to contribute anything but the first shares in.

But I'm not even sure if this was from a so-called taxable account and not from an IRA.
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