Easier Tax Planning

Posted in Foundation News

It’s time to search for tax deductions.   Changes in the tax code can be confusing for some, but the Community Foundation can help many people.  Look at these real-world examples of how some people have used a Donor Advised Fund (DAF) to to reduce their federal income taxes.

Stacking (or Lumping) Contributions

• Mr. and Mrs. B no longer have enough deductions to itemize them on their tax return.   However, they do have some extra cash.  They gave an amount equal to three years of their charitable giving to a Donor Advised Fund.  Now, coupled with other eligible expenses, they can itemize deductions.   They plan to advise their fund to make distributions to their favorite charities over the next three years.

Avoiding Capital Gains

• Mrs. C purchased shares in ABC Corp. in 1971.  Recently, ABC received a cash offer for the purchase of the company, which triggers a significant capital gain for Mrs. C.  Consequently, she donated 300 shares of ABC to a donor advised fund. She plans to advise the fund to make distributions to her church over the next five years.  Mrs. C avoided the capital gains on the 300 shares and received a tax deduction for an amount equal to the fair market value of the 300 shares on the date she donated the stock. The tax deduction also eliminated a large portion of her tax liability for her capital gains on the remaining shares she tendered.

Will a Donor Advised Fund Work for You?

These examples represent tax strategies appropriate for the individuals mentioned. They do not represent tax advice.  To find out if one of them might work for you, consult your personal tax professional.  She can call us and we will be glad to work as a team to help you plan a better tax strategy before the end of the year

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