Which appreciated stocks to donate??

[RJMJfund]

My husband and I would like to donate 18k in appreciated stocks by the end of the year. How do we choose which stock to donate? We received a sizable inheritance earlier in the year. We are planning on selling a fair amount that are in single stocks so we can reinvest into index funds. I'm having a hard time deciding which stocks to sell to reinvest and which to donate. There is a single stock, VRSN, that has 290% gain that we could actually sell most to cover the amount we would like to give. There are other stocks that we want to sell that have a 50-60% gain. Should we just donate everything from VRSN? This is my first time making a donation with appreciated stock and would "appreciate" any advice.

Thank you!!

[alex_686]

Check on step up cost basis and see if that applies. Assuming it does not..

The most tax efficient method is to gift the stock with the highest unrealized capital gains. Gift - not sell. Your charitable donation would be the value of the stock. If you sold you would have to pay capital gains tax which would reduce the amount that you could gift.

Then comes the more complex question of when to recognize capital gains. You want to get ride of single stocks because you want a diversified portfolio, but that means taxes recognized today instead of delayed. It all depends on your risk tolerance.

[livesoft]

It is not clear if VRSN was part of the inheritance or not. It is not clear if the inherited stocks received a stepped-up cost basis that is customary and/or if you are reporting that stepped-up basis or some other basis.

I would donate the shares with the highest unrealized capital gains held long-term. I think inherited stocks/funds get a long-term designation even if the deceased had ST holding period.

What is magic about $18K for a donation limit? For a MFJ return, the standard deduction is $24,800 and the SALT limit is $10K I think. So $18K of donation doesn't really get you much.

I don't know if you are using a Donor-Advised Fund (DAF) to help bunch charitable contributions, but that's what we do. And then we go bigger than $18K, say at least $40K to $60K which keeps us below the 50% of income limit.

[RJMJfund]

"I would donate the shares with the highest unrealized capital gains held long-term."

This is what I was thinking is the appropriate thing to do.

VRSN actually isn't part of the inheritance but it is a single stock we owned before discovering BH and index fund investing. It does have the highest unrealized long term gains, even compared to the stocks in the inheritance.

We donate 10% of our income yearly. Our regular yearly income is usually between 100-150k. This year is unique that we received 2 large inheritances. We already gave a lot of charity this year so we are itemizing our taxes, which we don't usually do. We are planning on liquateding a 100k traditional inherited IRA due to lower income and high charity this year which we don't expect to have in the next 10 years from now. So we would like to donate 10k of that and another 8k of estimated for our 2021 giving (since we are itemizing 2020 and may not for 2021).

[RJMJfund]

Check on step up cost basis and see if that applies. Assuming it does not..

We did get a step up with the inheritance but unfortunately the timing for the step up was during the COVID dip in the market.

[livesoft]

We donate 10% of our income yearly.

So donate 20% of your normal income or more to your DAF this week which serves as a place from which to make grants to the charities of your choice either in this tax year or a future tax year.

Then you can donate half (i.e. 10%) of that DAF to charity in 2020 and another half (i.e. 10%) the first week of 2021. You get a bigger tax deduction, clear out some dead wood from your portfolio and feel even more magnanimous.

In other words, think outside the artificial box of 10% a year while still helping the charities that you support. You should research the terms "DAF" and "bunching deductions." Clearly, you are doing some of that, but there may be more you can do with no decrease in what you spend on yourselves.

[diy60]

Open up a DAF and fund it with any portion of the stocks with the large unrealized gains. Then spread out your DAF grants across multiple years as you see fit. Rinse and repeat.

[NorCal13]

RElated Q: what to do if the largest appreciated holdings are low ER funds you actually like whereas some others that are less "bogle like' (with high ER, etc.) may have smaller gains but you'd prefer to have them out of the portfolio. Any thoughts on using factors other than appreciation alone - like ER, etc. to determine which appreciated funds to move to the DAF?

[FelixTheCat]

Open up a DAF and fund it with any portion of the stocks with the large unrealized gains. Then spread out your DAF grants across multiple years as you see fit. Rinse and repeat.

Here's an example of a Donor Advised Fund (DAF). https://www.fidelitycharitable.org/

There's no minimum to open a Fidelity DAF. You can donate your $18K in stocks. Then you can grant checks to the charities of your choice.

[livesoft]

RElated Q: what to do if the largest appreciated holdings are low ER funds you actually like whereas some others that are less "bogle like' (with high ER, etc.) may have smaller gains but you'd prefer to have them out of the portfolio. Any thoughts on using factors other than appreciation alone - like ER, etc. to determine which appreciated funds to move to the DAF?

Donate even MORE to your DAF and use the tax deduction to sell the shares with smaller gains for no tax hit. Of course, you should have been doing significant tax-loss harvesting all along, so that the realized gains should have been offset by earlier realized losses and this question should not really ever come up.

[NorCal13]

RElated Q: what to do if the largest appreciated holdings are low ER funds you actually like whereas some others that are less "bogle like' (with high ER, etc.) may have smaller gains but you'd prefer to have them out of the portfolio. Any thoughts on using factors other than appreciation alone - like ER, etc. to determine which appreciated funds to move to the DAF?

Donate even MORE to your DAF and use the tax deduction to sell the shares with smaller gains for no tax hit. Of course, you should have been doing significant tax-loss harvesting all along, so that the realized gains should have been offset by earlier realized losses and this question should not really ever come up.

Thanks but that wasn't my question so perhaps I should clarify:

I've already decided how much to move to a DAF (it's substantial and I really dont want to do more for tax reasons this year as I'm splitting DAF donations to two years for tax reasons). The Q is really about the selection criteria for the funds to be donated (regardless of the total donation $ amount).

Should I be looking at per share gains vs. total $ gains to decide which ones to donate? Ie the most appreciated securities by % and agglomerate those to the $ amount I want?

Should I use ER and 'desirability of holding' at all in my decsion?

I am pretty good about TLH so that's not really in play here. I am bunching up losses and deductions to the max this year as I expect next years AGI to be meaningfully lower..

[RJMJfund]

Open up a DAF and fund it with any portion of the stocks with the large unrealized gains. Then spread out your DAF grants across multiple years as you see fit. Rinse and repeat.

Here's an example of a Donor Advised Fund (DAF). https://www.fidelitycharitable.org/

There's no minimum to open a Fidelity DAF. You can donate your $18K in stocks. Then you can grant checks to the charities of your choice.

This is a great idea. Also to take advantage of itemizing taxes every 2-3 years when we move more money into it. Thanks!

[grabiner]

RElated Q: what to do if the largest appreciated holdings are low ER funds you actually like whereas some others that are less "bogle like' (with high ER, etc.) may have smaller gains but you'd prefer to have them out of the portfolio. Any thoughts on using factors other than appreciation alone - like ER, etc. to determine which appreciated funds to move to the DAF?

In that situation, it's better to keep the holdings you like. You may be able to avoid the capital gains on those holdings by keeping them for the rest of your life.

I have done the same thing. The fund I donate to charity is not the one with the largest gains, but one I would prefer to get out of my taxable account because it helps me restructure my portfolio.

[NorCal13]

Thanks @grabiner that's the answer I was looking for. I greatly appreciate it.

Happy holidays to all Bogleheads!

[BabaWawa]

RElated Q: what to do if the largest appreciated holdings are low ER funds you actually like whereas some others that are less "bogle like' (with high ER, etc.) may have smaller gains but you'd prefer to have them out of the portfolio. Any thoughts on using factors other than appreciation alone - like ER, etc. to determine which appreciated funds to move to the DAF?

Donate even MORE to your DAF and use the tax deduction to sell the shares with smaller gains for no tax hit. Of course, you should have been doing significant tax-loss harvesting all along, so that the realized gains should have been offset by earlier realized losses and this question should not really ever come up.

Thanks but that wasn't my question so perhaps I should clarify:

I've already decided how much to move to a DAF (it's substantial and I really dont want to do more for tax reasons this year as I'm splitting DAF donations to two years for tax reasons). The Q is really about the selection criteria for the funds to be donated (regardless of the total donation $ amount).

Should I be looking at per share gains vs. total $ gains to decide which ones to donate? Ie the most appreciated securities by % and agglomerate those to the $ amount I want?

Should I use ER and 'desirability of holding' at all in my decsion?

I am pretty good about TLH so that's not really in play here. I am bunching up losses and deductions to the max this year as I expect next years AGI to be meaningfully lower..

My selection criteria for donating appreciated assets are two fold:
1) favor shares with largest unrealized CG. Looking at tax lots that usually favors selecting shares held longest (FIFO).
2) favor assets that have risen higher than desired asset allocation.

Usually the chosen asset to be donated satisfies both.