Course: Income Tax Planning
Lesson 15: Property Transactions
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?
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,