Monthly Minute – November 2021



This month we continue our discussion on year-end tax planning. With Thanksgiving coming up, we thought we’d dive into giving a little bit more. 

There are many ways to give. You can give of your time, your talent, and you can even simply give someone your attention. What most people think of when it comes to giving is doing so financially. 

As we mentioned in our quarterly newsletter, giving should first be from the heart. We still believe that to be true. That doesn’t mean your giving shouldn’t also be strategic. 

Last month we talked about QCDs as a way to give strategically. This month we want to share a couple other ways you can give in a tax efficient way. 

Appreciated Assets

The first way is giving appreciated assets. The most common option is to give stock that has grown a significant amount. 

You can also give other appreciated assets such as tangible property (art) or property used for business or trade, but the tax benefits aren’t as great. 

What’s An Appreciated Stock?

When you buy a stock (ETF, bond, index fund, mutual fund…etc) in a taxable account, the purchase price becomes what is known as your cost basis. An appreciated stock is one where the price you purchased it at is lower than its current price. 

If you hold the position for less than one year and sell it, any gains will be short-term capital gains and taxed as ordinary income at your marginal tax rate. If you hold it for longer than one year, any gains at the time you sell it will be long-term capital gains and taxed at a lower rate. 

Stocks (or other assets) that are held a long time typically benefit the most from this type of giving. 

How Does It Work?

Let’s assume you want to make a charitable gift of $30,000 this year. You have the cash so one option would be to just give that and be done with it. You would be able to deduct $30,000 in charitable giving. 

Let’s also assume you invested $12,000 in XYZ stock 15 years ago. That initial investment is now worth $30,000. If you were to sell that stock now, you would have to pay taxes on the $18,000 in gain. 

If you decided to give the stock, you would avoid the taxes on the $18,000 in gain and still be able to deduct $30,000 in charitable giving. 

This type of giving is scalable. When the giving need is really large, it provides an opportunity for the second strategic way we want to share today. 

Donor Advised Funds

A donor advised fund (DAF) is a separately identified fund or account that is maintained and operated by a 501(c)(3) organization. 

In layman’s terms, it’s an account maintained by a charity that can be funded by individuals. Once funded, you lose legal control over the money. Meaning you can’t get it back. 

You still have control over how it’s invested and more importantly, how the money is distributed to various charities. 

Donor Advised Fund

What’s The Benefit?

A DAF allows you to make a large donation in any given year and spread the giving out to different charities in future years. 

Donor advised funds are especially useful in years when you have a big windfall. Whether that means you sold your business, had a huge year in sales, or any other reason. 

In these years, your income is typically higher than others. Using a DAF allows you to lump future year giving into one year. 

How Does It Work?

Let’s assume you’re married (MFJ), run a small business, and make roughly $500,000 a year. You usually give $50,000 each year as well. 

Now let’s assume you sold your business for $5MM and you’re going to retire. This means you will no longer be making $500,000 and will likely be in a much lower tax bracket. 

Giving a larger amount this year will be the most tax efficient thing to do, but you may not know exactly where you want all of the money to go. Let’s say you settle on giving away $500,000.

By using a DAF fund, you can put all $500,000 in the fund this year and not have to decide where it will all eventually end up. You will also get the full deduction on the $500,000 for tax purposes. 

Combining Strategies

One option is to give appreciated stock to a DAF. This allows you to make a large donation while at the same time offloading a potential large amount of capital gains taxes you would’ve had to pay if you sold them. 

These strategies may not be for everybody, but they’re worth considering. Especially for those in the higher tax brackets and with appreciated stocks or other assets.

Do some homework or contact a good financial planner to discuss whether or not this is something you should consider as we head into the end of the year.  

Did You Know?

Gifts of appreciated property are deductible up to 30% of your adjusted gross income (AGI). 

Cash or non-appreciated property are deductible up to 60% of your income. 


What if today, we were just grateful for everything?

-Charlie Brown 

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