Gifting shares vs. cash

[A440]

How does one decide if it is a better tax deduction to gift shares of appreciated stock or just give cash?
Does it come down to whether or not you take the standard deduction or itemize?

[calmaniac]

How does one decide if it is a better tax deduction to gift shares of appreciated stock or just give cash?
Does it come down to whether or not you take the standard deduction or itemize?

Are you "gifting" to a human or a non-profit/charity? If a human, are they claimed as a dependent on your taxes (or for that matter someone else's)?

[livesoft]

It does not matter if you take the standard deduction or itemize.

However, if you gift shares held long-term with unrealized capital gains to a bona fide charity, then you will not be taxed on the unrealized capital gains. If you have to realize capital gains in order to gift cash, then you will have to report the realized capital gains on your tax return.

[jebmke]

There might be other considerations.

If you are never going to sell the stock, it is less critical to consider the stock approach.

Gifting (to charity) appreciated assets is potentially deductible but the deduction is limited to 30% of your AGI, although any excess would carryover to the next tax year. Cash donations are deductible up to 60% of your AGI.

In any case, the deductions generally will only (potentially) reduce your tax liability if the total deductions on Schedule A exceed the standard deduction. There are some exceptions. In some states, it may be advantageous to itemize even if your total deductions are less than the standard deduction.

[Lee_WSP]

It depends on a bevy of considerations.

What the purpose of the gift is, whether there are alternative assets, whether it's deductible, etc etc.

[afan]

If the recipient is not a qualified charity then there is no tax deduction.
If you take the standard deduction then you cannot deduct gifts to charity. Making large enough gifts to charity can move one from optimally taking the standard deduction to optimally itemizing.

If you clarify
The recipient of the gifts? Charities or not?
The size of the gifts as a percent of you AGI.
If giving to charities, indicate whether you have enough deductions to itemize without the gifts.

You can get more specific suggestions

[A440]

It does not matter if you take the standard deduction or itemize.

However, if you gift shares held long-term with unrealized capital gains to a bona fide charity, then you will not be taxed on the unrealized capital gains. If you have to realize capital gains in order to gift cash, then you will have to report the realized capital gains on your tax return.

So if I'm trying to rebalance a taxable account, gifting shares with unrealized capital gains to a bona fide charity in lieu of cash might be beneficial?

[WapelloHawk]

We gift cash to our kids and our most appreciated MF shares to our DAF.

[toddthebod]

Unless you anticipate needing the cash in the next year or you are exceeding the deductibility limit, I cannot imagine a situation where it would make sense to give cash. At the very least, you can donate the shares and repurchase the same stock.

[livesoft]

So if I'm trying to rebalance a taxable account, gifting shares with unrealized capital gains to a bona fide charity in lieu of cash might be beneficial?

Definitely. The unrealized capital gains MUST BE long-term.

[calmaniac]

So if I'm trying to rebalance a taxable account, gifting shares with unrealized capital gains to a bona fide charity in lieu of cash might be beneficial?

Depending on your situation, you may want to consider a donor advised fund. You can bundle the stock donation into a single year to maximize the tax exemption and then distribute the donation over several years.

https://www.bogleheads.org/wiki/Donor_advised_fund

https://www.fidelitycharitable.org/arti ... ction.html

[A440]

So if I'm trying to rebalance a taxable account, gifting shares with unrealized capital gains to a bona fide charity in lieu of cash might be beneficial?

Definitely. The unrealized capital gains MUST BE long-term.

If they were inherited, I believe they count as long-term, even if it has been less than a year, because of the step-up in basis. Is this correct?

[A440]

Is there a way to gift stock from an inherited non-spouse beneficiary IRA? I believe to make a QCD one must be at least 73 years of age.

[livesoft]

If they were inherited, I believe they count as long-term, even if it has been less than a year, because of the step-up in basis. Is this correct?

Sounds good to me, but I would gift shares that have 100%, 200%, 300% gains that have been held a longer time myself.

[Geologist]

Is there a way to gift stock from an inherited non-spouse beneficiary IRA? I believe to make a QCD one must be at least 73 years of age.

You must be at least 70.5 years old to make a QCD. If you aren't that old, then you can give stock from an inherited IRA by taking a distribution (a taxable event) and then donating the stock just like any other donation. You would have next to no gain because the basis will be the value on the day you distribute it from the IRA.

[A440]

Is there a way to gift stock from an inherited non-spouse beneficiary IRA? I believe to make a QCD one must be at least 73 years of age.

You must be at least 70.5 years old to make a QCD. If you aren't that old, then you can give stock from an inherited IRA by taking a distribution (a taxable event) and then donating the stock just like any other donation. You would have next to no gain because the basis will be the value on the day you distribute it from the IRA.

Thank you.

[KBR]

There might be other considerations.

If you are never going to sell the stock, it is less critical to consider the stock approach.

Gifting (to charity) appreciated assets is potentially deductible but the deduction is limited to 30% of your AGI, although any excess would carryover to the next tax year. Cash donations are deductible up to 60% of your AGI.

In any case, the deductions generally will only (potentially) reduce your tax liability if the total deductions on Schedule A exceed the standard deduction. There are some exceptions. In some states, it may be advantageous to itemize even if your total deductions are less than the standard deduction.

I believe it carries over for as long as five years. Then it expires.

[KBR]

It does not matter if you take the standard deduction or itemize.

However, if you gift shares held long-term with unrealized capital gains to a bona fide charity, then you will not be taxed on the unrealized capital gains. If you have to realize capital gains in order to gift cash, then you will have to report the realized capital gains on your tax return.

So if I'm trying to rebalance a taxable account, gifting shares with unrealized capital gains to a bona fide charity in lieu of cash might be beneficial?

If you donate cash, it is 100% deductible up to 60% I believe AGI. If you donate stocks and bonds I believe it is 100% deductible up to 30% AGI. However much is donated that is over 60% or 30% respectively gets bumped over to the next year where it has that same limitation, 60% and 30% if I understand correctly. It continues to bump to the next year and to the next year, for as long as five years, but not past five years. The value of the stocks and bonds is the value that you donate which includes capital gains. You would not be taxed on those capital gains then. So if you have any appreciable capital gains, it is totally a no-brainer as long as there is no chance that , it will bump out past five years. If it will bump out past five years because the amount is so large or AGI is so small, then you might consider donating cash instead because it is more deductible, 60% instead of 30%. If you have $1000 in cash or $1000 in Stocks and bonds with appreciated value. I would think that you would donate the stocks and bonds and if desired just use the cash to purchase and so give yourself a higher cost basis.