Year-End Tax Tips

Don't wait until next year to plot your tax strategy. Here are some tips that will help you slash your 2000 tax bill.

benefits than a cash contribution,” says Stewart. “You’ll get a full write-off (as long as you held the securities for more than a year). The charity can sell the securities without owing any tax, and you won’t owe any capital gains tax.” What’s more, contributing appreciated securities may allow you to get out of a position you refrained from selling because of the tax consequences.

To implement this strategy, call the charity and get its brokerage account number. Then, call your own broker or your mutual fund company and explain what you want to do.

“The timing of transferring shares to a charity depends on a number of factors,” says Chris Wheaton, a CPA and investment advisor in Larkspur, California. “To be safe, I recommend you allow three weeks for the transfer, so you should start by early December if you want a deduction for this year.”

A direct gift of appreciated securities may work well for one $20,000 gift, but not for 10 $2,000 gifts to various causes because each gift requires some time-consuming paperwork. “In this situation you might consider setting up a donor-advised fund,” says Wheaton. “They’re available through many local community foundations and some major mutual fund companies, such as Fidelity and Vanguard.” Charles Schwab also has a donor-advised fund. Donor-advised funds are pools of assets destined for charitable giving. Each donor has an account in the fund. Donors direct how the amount in their account will be donated to various charities.

Contributions you make to a donor-advised fund are immediately deductible. The fund will sell the securit
ies you donate to raise cash, then send the cash to qualified charities at your direction. “The paperwork is simple, and you retain considerable control,” says Wheaton. “You can make a contribution now to a donor-advised fund, take a current deduction, and spread the charitable gifts over a number of years.”

Year-end charitable gifts don’t have to be in the form of securities, of course. “You can give cash,” says Stewart. “You also can put donations on a credit card and take a deduction for 2000, even if you don’t make the payment until next year. If you make noncash contributions, you can deduct the fair market value of the items you donate.” Noncash gifts require appraisals for deductions of more than $5,000.

Other types of year-end gifts should be considered, too. “If you’re concerned about a future estate-tax obligation, you can make tax-free gifts each year,” says Ed Slott, a CPA in Rockville Centre, New York. “Each person can give up to $10,000 worth of assets to any number of recipients each year. However, these gifts are “use it or lose it.” If you skip giving one year, you can’t make it up with a larger gift in the future.”

Wheaton says that estate-reducing gifts to younger family members should be made with cash, while appreciated securities should go to charity. If you have paper losses on securities and you don’t wish to hold them any longer, you can sell those securities to get

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