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Scenarios for Uncertain Times
During the past year your portfolio of securities has declined in value, but because of the performance of the market over the past decade, most of your securities are still worth considerably more than you paid for them. Thus you would incur considerable tax on the capital gain if you decide to adjust your portfolio, divesting yourself of certain problem securities that you think may not perform well in the future.
If you are considering a charitable gift this year, contribute some of the appreciated securities that you think it is time to sell. You will receive two benefits - a deduction for the current value of the securities (assuming that you have owned them for more than a year) and no tax on the capital gain. Even if you don't itemize deductions, you still avoid the tax on the gain that you would have incurred with a sale.
You have some securities, especially ones that you purchased in the last couple of years, that are under water. You think that some of these might rebound, but you are not sure about others.
Follow a different strategy if you want to make a gift using depreciated securities. Don't give the securities themselves as you would if they were appreciated. Instead, sell the securities and claim an investment loss and a charitable deduction for their current value.
After totaling the deductions you or you and your spouse could itemize, you determine that it will be better to claim the standard deduction.
If your itemizable deductions are just under the standard deduction, you might consider bunching some of your charitable gifts so that they can be claimed in a single year. You itemize deductions on your return for the year they are bunched and claim the standard deduction for other years. |
