Course:  Income Tax Planning
Lesson 15: Property Transactions

Student Question:

Dear Greene Consulting Team – 
 
In the lesson, deducting donations of “cash” versus “long term appreciated securities” are differentiated. I’m curious about “short-term appreciated securities”.  In other words, if I own a stock – bought at $10,000 and it’s worth $50,000 when I donate, but I’ve only owned it 6 months when I donate it – what are the income tax deduction effects?
 
Thanks

Bill


Instructor Response:

Hi Bill,
 
Great question.  Contributions of cash and “ordinary income” property to a Private Foundation are deductible up to 30% of the taxpayer’s adjusted gross income (AGI). 

  • The definition of “ordinary income property” is any property that, if sold at a gain, would be taxed at ordinary income tax rates to the extent of the gain.  
  • Gains on the sale of short-term capital gain property are taxed at ordinary income tax rates.  

A contribution of short-term capital gain property with a fair market value of $50,000 is a charitable contribution of $50,000. 

  • Your charitable deduction for cash or ordinary income property is limited to the lesser of the charitable contribution or 30% of your AGI.  
  • If your AGI was at or above $166,667, you could deduct the entire $50,000 charitable contribution on the current year’s income tax return as part of your itemized deductions. 

Onward and Upward,

Bruce