Gold taxation thoughts

Discussion of the Gold portion of the Permanent Portfolio

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Xan
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Re: Gold taxation thoughts

Post by Xan » Wed Feb 28, 2018 6:00 pm

Mr Vacuum wrote:
ochotona wrote:Trade is done, got the same price for physical gold today as when I sold my ETF on Friday - a few nail-biting moments there due to volatility. Only 1.5% premium, it was the annual clearance sale at Texas PM. Random year Can Gold Maple Leaves. I was on the I-10 in my car, placing this big order (we can talk on the phone with hands-free devices in Texas. Probably was a bad idea though).
That's pretty slick. To wrap around to the original question, you ended up in the same situation in terms of taxes, essentially transferring from one IRA to another IRA, right?

Also earlier you remarked/asked about tax loss harvesting. As far as I can tell the collectibles rule only applies an upper limit for taxing gains, whereas collectibles losses simply count as capital losses by the normal short or long term rules.

There's also this odd idea that gold, being a collectible and not a security, is exempt from wash sale rules. So you can just sell and rebuy anytime you want to record a loss without waiting 31 days or finding a similar but different asset to buy? It's logical but I don't recall hearing about it around here. Do people do this?

https://www.forbes.com/sites/baldwin/20 ... gold-bugs/
Unlike most investments, metal ETFs are exempt from the wash sale rule limiting losses on securities sold and then immediately repurchased. Robert Gordon, president of Twenty-First Securities, explains: The IRS, avid to collect the higher collectible-rate tax, has decreed that the metal funds are not “securities.” But the wash sale statute applies only to “securities.”
I'm pretty sure somebody here has a story of going to his/her gold dealer with some gold, and while that gold was sitting on the counter, sold and re-bought it, complete with a receipt for both transactions. The dealer took a small cut for facilitating.
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Re: Gold taxation thoughts

Post by Mr Vacuum » Wed Feb 28, 2018 6:20 pm

Xan wrote: I'm pretty sure somebody here has a story of going to his/her gold dealer with some gold, and while that gold was sitting on the counter, sold and re-bought it, complete with a receipt for both transactions. The dealer took a small cut for facilitating.
Gotcha. Hitting the streets with coins to do a rebuy steps up the activation energy a level or two vs. trading ETFs in the bathrobe, IMHO.
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Re: Gold taxation thoughts

Post by Libertarian666 » Wed Feb 28, 2018 6:55 pm

Xan wrote:
Mr Vacuum wrote:
ochotona wrote:Trade is done, got the same price for physical gold today as when I sold my ETF on Friday - a few nail-biting moments there due to volatility. Only 1.5% premium, it was the annual clearance sale at Texas PM. Random year Can Gold Maple Leaves. I was on the I-10 in my car, placing this big order (we can talk on the phone with hands-free devices in Texas. Probably was a bad idea though).
That's pretty slick. To wrap around to the original question, you ended up in the same situation in terms of taxes, essentially transferring from one IRA to another IRA, right?

Also earlier you remarked/asked about tax loss harvesting. As far as I can tell the collectibles rule only applies an upper limit for taxing gains, whereas collectibles losses simply count as capital losses by the normal short or long term rules.

There's also this odd idea that gold, being a collectible and not a security, is exempt from wash sale rules. So you can just sell and rebuy anytime you want to record a loss without waiting 31 days or finding a similar but different asset to buy? It's logical but I don't recall hearing about it around here. Do people do this?

https://www.forbes.com/sites/baldwin/20 ... gold-bugs/
Unlike most investments, metal ETFs are exempt from the wash sale rule limiting losses on securities sold and then immediately repurchased. Robert Gordon, president of Twenty-First Securities, explains: The IRS, avid to collect the higher collectible-rate tax, has decreed that the metal funds are not “securities.” But the wash sale statute applies only to “securities.”
I'm pretty sure somebody here has a story of going to his/her gold dealer with some gold, and while that gold was sitting on the counter, sold and re-bought it, complete with a receipt for both transactions. The dealer took a small cut for facilitating.
I have done that a couple of times but wash sale rules wouldn't have been involved anyway because my sale was at a profit.
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Re: Gold taxation thoughts

Post by Xan » Wed Feb 28, 2018 7:04 pm

Libertarian666 wrote:
Xan wrote:
Mr Vacuum wrote:
That's pretty slick. To wrap around to the original question, you ended up in the same situation in terms of taxes, essentially transferring from one IRA to another IRA, right?

Also earlier you remarked/asked about tax loss harvesting. As far as I can tell the collectibles rule only applies an upper limit for taxing gains, whereas collectibles losses simply count as capital losses by the normal short or long term rules.

There's also this odd idea that gold, being a collectible and not a security, is exempt from wash sale rules. So you can just sell and rebuy anytime you want to record a loss without waiting 31 days or finding a similar but different asset to buy? It's logical but I don't recall hearing about it around here. Do people do this?

https://www.forbes.com/sites/baldwin/20 ... gold-bugs/
I'm pretty sure somebody here has a story of going to his/her gold dealer with some gold, and while that gold was sitting on the counter, sold and re-bought it, complete with a receipt for both transactions. The dealer took a small cut for facilitating.
I have done that a couple of times but wash sale rules wouldn't have been involved anyway because my sale was at a profit.
That may be what I'm thinking of.
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Re: Gold taxation thoughts

Post by Libertarian666 » Wed Feb 28, 2018 8:40 pm

Xan wrote:
Libertarian666 wrote:
Xan wrote:
I'm pretty sure somebody here has a story of going to his/her gold dealer with some gold, and while that gold was sitting on the counter, sold and re-bought it, complete with a receipt for both transactions. The dealer took a small cut for facilitating.
I have done that a couple of times but wash sale rules wouldn't have been involved anyway because my sale was at a profit.
That may be what I'm thinking of.
I'm pretty sure that the wash sale rule doesn't apply to metals.

But if you're still worried about selling at a loss and then buying back, just buy something else, like a different coin. People do that all the time with similar but non-identical stock ETFs.
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Re: Gold taxation thoughts

Post by sophie » Thu Mar 01, 2018 7:32 am

I can confirm that the wash sale rules don't apply. I researched IRS rules, then tax loss harvested gold Eagles through APMEX in 2013. Per the guy I talked to on the phone, they were doing a ton of those transactions at the time. I had to mail them coins and get them mailed right back though.
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Re: Gold taxation thoughts

Post by Mr Vacuum » Thu Mar 01, 2018 7:28 pm

sophie wrote:I can confirm that the wash sale rules don't apply. I researched IRS rules, then tax loss harvested gold Eagles through APMEX in 2013. Per the guy I talked to on the phone, they were doing a ton of those transactions at the time. I had to mail them coins and get them mailed right back though.
Thanks for confirming, sophie. Good deal.

My personal long run expectation for gold is effectively the fed’s inflation target, so I’m not concerned holding most of the allocation in my SEP IRA via Fidelity, but the ability to tax loss harvest that volatile stinker occasionally sure is enticing and may merit some shuffling eventually.
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Re: Gold taxation thoughts

Post by ochotona » Sat Mar 03, 2018 10:28 am

Tech, can you really transfer one physical gold IRA to a different custodian without having to liquidate?

Here is my Yelp review of Goldstar Trust.

https://www.yelp.com/biz/goldstar-trust ... y-amarillo
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Re: Gold taxation thoughts

Post by Kriegsspiel » Sat Mar 03, 2018 10:32 am

I've heard boating accidents are the #1 liquidator of gold in taxable accounts.
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Re: Gold taxation thoughts

Post by ochotona » Sat Mar 03, 2018 10:43 am

Kriegsspiel wrote:I've heard boating accidents are the #1 liquidator of gold in taxable accounts.
I had one of those. Dang, I felt so bad.
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Re: Gold taxation thoughts

Post by Kriegsspiel » Sat Mar 03, 2018 11:18 am

Fuck safe deposit boxes, my gold's in Davy Jones' Locker!
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Re: Gold taxation thoughts

Post by Libertarian666 » Sun Mar 04, 2018 7:25 am

ochotona wrote:Tech, can you really transfer one physical gold IRA to a different custodian without having to liquidate?
I have no idea, although I don't know why that would be impossible in theory. What I liquidated was a Swiss franc annuity in a profit sharing plan.
That should have been easy but wasn't because the insurance company was totally incompetent at sending me the money even though they were already using almost identical instructions to pay my mother's annuity every quarter.
I'm still waiting for Fidelity to transfer the money from my profit sharing account to my rollover IRA, because for some reason that can't be done online. :(
ochotona wrote: Here is my Yelp review of Goldstar Trust.

https://www.yelp.com/biz/goldstar-trust ... y-amarillo
Nice! I have found them very good so far, but they are waiting for Fidelity to have the money in the right account before funding.
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Re: Gold taxation thoughts

Post by Libertarian666 » Wed Mar 07, 2018 7:08 pm

Libertarian666 wrote:
ochotona wrote:Tech, can you really transfer one physical gold IRA to a different custodian without having to liquidate?
I have no idea, although I don't know why that would be impossible in theory. What I liquidated was a Swiss franc annuity in a profit sharing plan.
That should have been easy but wasn't because the insurance company was totally incompetent at sending me the money even though they were already using almost identical instructions to pay my mother's annuity every quarter.
I'm still waiting for Fidelity to transfer the money from my profit sharing account to my rollover IRA, because for some reason that can't be done online. :(
ochotona wrote: Here is my Yelp review of Goldstar Trust.

https://www.yelp.com/biz/goldstar-trust ... y-amarillo
Nice! I have found them very good so far, but they are waiting for Fidelity to have the money in the right account before funding.
Ok, Fidelity has transferred part of the money and they have gotten it, so I've ordered some gold from my dealer to go into the IRA.

Interestingly enough, the premium for proof Eagles is pretty low, about 2.5%, whereas usually it's more like 15% at the bid, according to the dealer. He said he was paying $200 over gold for proofs just last year. So that's what I bought, and will continue to buy as long as they have such a low premium. How much lower can it go? Probably not much, but it can go a lot higher.
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Re: Gold taxation thoughts

Post by Libertarian666 » Sat Mar 17, 2018 3:24 pm

Libertarian666 wrote:
Libertarian666 wrote:
ochotona wrote:Tech, can you really transfer one physical gold IRA to a different custodian without having to liquidate?
I have no idea, although I don't know why that would be impossible in theory. What I liquidated was a Swiss franc annuity in a profit sharing plan.
That should have been easy but wasn't because the insurance company was totally incompetent at sending me the money even though they were already using almost identical instructions to pay my mother's annuity every quarter.
I'm still waiting for Fidelity to transfer the money from my profit sharing account to my rollover IRA, because for some reason that can't be done online. :(
ochotona wrote: Here is my Yelp review of Goldstar Trust.

https://www.yelp.com/biz/goldstar-trust ... y-amarillo
Nice! I have found them very good so far, but they are waiting for Fidelity to have the money in the right account before funding.
Ok, Fidelity has transferred part of the money and they have gotten it, so I've ordered some gold from my dealer to go into the IRA.

Interestingly enough, the premium for proof Eagles is pretty low, about 2.5%, whereas usually it's more like 15% at the bid, according to the dealer. He said he was paying $200 over gold for proofs just last year. So that's what I bought, and will continue to buy as long as they have such a low premium. How much lower can it go? Probably not much, but it can go a lot higher.
The first gold purchase is now showing up in my Gold Star Trust IRA. The dealer told me that the proofs I bought were probably already in the Delaware depository, so they shouldn't take too long to show up, and it looks as though he was right.
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Re: Gold taxation thoughts

Post by ochotona » Wed Nov 27, 2019 5:11 pm

You can donate any appreciated security to a Donor Advised Fund. This lets you avoid cap gains tax and get a current year tax deduction. Then you can write checks to any charity at any time. I heard a good podcast from Schwab Charitable today. Good way to get rid of gold ETF shares.
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Re: Gold taxation thoughts

Post by ochotona » Wed Dec 04, 2019 7:16 pm

Yes, you can donate physical gold to a Donor Advised Fund run by Schwab Charitable. What happens is you make the donation ($50,000 to open the account), and you can get (1) the current year tax deduction and (2) then you disappear your collectibles tax gains problem. Then, they give you cash credit for the gold, which you can invest in a variety of conventional portfolios, and you can make donations to charities (only charities... you lose the ability to do anything else with the money, and it's irrevocable).

I paid $12,500 for a 10 oz gold bar. Well let's say in a number of years gold does take the rocket ship in dollar terms, and it's $50,000, and I hit a rebalancing band. I can push it into a Donor Advised Fund, get these tax benefits, and then I'll be able to make charitable contributions. I anticipate donating more than $50,000 to charity over the span of my life; that's not hard to do at all.

There is a 2.4% fee for handling and assessing the gold. This is where ETF would be much easier. But the tax benefits are much larger than the fee.

This concept works with any appreciated asset.

If you are interested, contact:

Manager, Charitable Strategies | Schwab Charitable
Tel (720) 418-4789
9800 Schwab Way, Lone Tree, CO 80124
www.schwabcharitable.org
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Re: Gold taxation thoughts

Post by vnatale » Wed Dec 04, 2019 7:54 pm

ochotona wrote:
Wed Dec 04, 2019 7:16 pm
Yes, you can donate physical gold to a Donor Advised Fund run by Schwab Charitable. What happens is you make the donation ($50,000 to open the account), and you can get (1) the current year tax deduction and (2) then you disappear your collectibles tax gains problem. Then, they give you cash credit for the gold, which you can invest in a variety of conventional portfolios, and you can make donations to charities (only charities... you lose the ability to do anything else with the money, and it's irrevocable).

I paid $12,500 for a 10 oz gold bar. Well let's say in a number of years gold does take the rocket ship in dollar terms, and it's $50,000, and I hit a rebalancing band. I can push it into a Donor Advised Fund, get these tax benefits, and then I'll be able to make charitable contributions. I anticipate donating more than $50,000 to charity over the span of my life; that's not hard to do at all.

There is a 2.4% fee for handling and assessing the gold. This is where ETF would be much easier. But the tax benefits are much larger than the fee.

This concept works with any appreciated asset.

If you are interested, contact:

Manager, Charitable Strategies | Schwab Charitable
Tel (720) 418-4789
9800 Schwab Way, Lone Tree, CO 80124
www.schwabcharitable.org
One thing to watch out regarding your $50,000 example is the following....there are either 30% or 50% of adjusted gross income limitations involved for taking a current year deduction for charitable contributions.

https://www.irs.gov/publications/p526#e ... k100017757

"Limits based on 50% of adjusted gross income

There are two 50% limits that may apply to your contributions.

Noncash contributions to 50% limit organizations. If you make noncash contributions to organizations described earlier under First category of qualified organizations (50% limit organizations) , your deduction for the noncash contributions is limited to 50% of your adjusted gross income minus your cash contributions subject to the 60% limit.

Capital gain property exception. A 30% limit applies to noncash contributions of capital gain property if you figure your deduction using fair market value without reduction for appreciation. See Certain capital gain property contributions to 50% limit organizations , later, under Limits based on 30% of adjusted gross income, for more information."

Whatever you have contributed in excess of whichever limitation applied gets carried over to the next year (and even the next if you again run into limitation issues). That can be okay if you are itemizing every year. But you may end up getting the benefit the year of the contribution but not in the carryover year because it along with your itemized deductions are still lower than the standard deduction.

It's even worse for someone like me who every other year does all my payments - state taxes, real estate taxes, contributions - that constitute itemized deductions while doing NONE of them in the off year so I take FULL advantage of the standard deduction (getting a big deduction for not spending a cent).

If some of my contributions gets pushed into that next year, it's valueless to me. I've had to carefully make my contributions to avoid that from happening.

Vinny
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Re: Gold taxation thoughts

Post by sophie » Thu Dec 05, 2019 8:30 am

Actually Vinny, there's no problem at all if ochotona sends the money to a donor advised fund.

DAFs are really nice, as they separate the decisions of how much & when to set aside for charity to which organizations & how much each to favor. Basically since discovering those I will never donate by check again. It'll always be highly appreciated shares. I simply then buy back the same # of shares with the money set aside for charity. Then I get the charitable deduction on the full amount (since I already itemize) AND avoid capital gains tax on the appreciated portion of the donated shares.

The math, for me, works out to a total tax savings of 60% of the donated amount, assuming the shares have appreciated exactly 100%. In other words, a charitable donation of $100 actually costs me only $40. Crazy!

I bet there are people who are quietly managing to figure out a way to game this system to their taxation advantage. Something like creating a charity and then funneling money back to themselves for administrative expenses. I'm sure that's illegal but you can see how great the temptation is.
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Re: Gold taxation thoughts

Post by Libertarian666 » Thu Dec 05, 2019 10:31 am

sophie wrote:
Thu Dec 05, 2019 8:30 am
Actually Vinny, there's no problem at all if ochotona sends the money to a donor advised fund.

DAFs are really nice, as they separate the decisions of how much & when to set aside for charity to which organizations & how much each to favor. Basically since discovering those I will never donate by check again. It'll always be highly appreciated shares. I simply then buy back the same # of shares with the money set aside for charity. Then I get the charitable deduction on the full amount (since I already itemize) AND avoid capital gains tax on the appreciated portion of the donated shares.

The math, for me, works out to a total tax savings of 60% of the donated amount, assuming the shares have appreciated exactly 100%. In other words, a charitable donation of $100 actually costs me only $40. Crazy!

I bet there are people who are quietly managing to figure out a way to game this system to their taxation advantage. Something like creating a charity and then funneling money back to themselves for administrative expenses. I'm sure that's illegal but you can see how great the temptation is.
Too bad NY doesn't have a 100% top tax rate, because then your charitable donations would have a negative after-tax cost! >:D

But for those of us who are in a high federal tax bracket but have the misfortune to live in a state without income taxes, we still get to benefit by donating RMDs directly to charity if we don't need the money.

Personally, it looks as though I'm going to be in the 0% tax bracket again for the fourth year in a row, so I don't need to worry about that. :-)
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Re: Gold taxation thoughts

Post by sophie » Thu Dec 05, 2019 10:54 am

OK so I'm officially jealous....

I kind of view the state/local taxes in a larger context. I don't own or need a car and my transportation costs for commuting and 90% of trips are limited to the price of resoling shoes. Plus an extensive cat-sitting cooperative in my building.

I've toyed with the idea of retiring to Alaska though. The ultimate low-tax state!
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Re: Gold taxation thoughts

Post by Libertarian666 » Thu Dec 05, 2019 10:59 am

sophie wrote:
Thu Dec 05, 2019 10:54 am
OK so I'm officially jealous....

I kind of view the state/local taxes in a larger context. I don't own or need a car and my transportation costs for commuting and 90% of trips are limited to the price of resoling shoes. Plus an extensive cat-sitting cooperative in my building.

I've toyed with the idea of retiring to Alaska though. The ultimate low-tax state!
"Alaska is the only state that does not collect state sales tax or levy an individual income tax."

That sounds good but I suspect the higher cost of living would more than make up for those savings compared to a state like Texas, for example.
Any time you want to move down here I'll be happy to throw you a welcoming party!
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Re: Gold taxation thoughts

Post by sophie » Fri Dec 06, 2019 9:26 am

Libertarian666 wrote:
Thu Dec 05, 2019 10:59 am
sophie wrote:
Thu Dec 05, 2019 10:54 am
OK so I'm officially jealous....

I kind of view the state/local taxes in a larger context. I don't own or need a car and my transportation costs for commuting and 90% of trips are limited to the price of resoling shoes. Plus an extensive cat-sitting cooperative in my building.

I've toyed with the idea of retiring to Alaska though. The ultimate low-tax state!
"Alaska is the only state that does not collect state sales tax or levy an individual income tax."

That sounds good but I suspect the higher cost of living would more than make up for those savings compared to a state like Texas, for example.
Any time you want to move down here I'll be happy to throw you a welcoming party!
Ha, thanks! There certainly is a vocal representation from Texas on this board. It's got a lot going for it, for sure. LIkely better for libertarians than New York City, will absolutely admit.
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Re: Gold taxation thoughts

Post by Libertarian666 » Sat Dec 07, 2019 12:27 pm

MangoMan wrote:
Sat Dec 07, 2019 8:27 am
For a completely different perspective on Donor Advised Funds, read this:

https://www.whitecoatinvestor.com/pro-c ... sed-funds/
The notion that saving taxes is somehow a "jerk move" is an alien concept to me.
Not that I have enough income to worry about this issue.
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Re: Gold taxation thoughts

Post by ochotona » Sat Dec 07, 2019 4:11 pm

Libertarian666 wrote:
Sat Dec 07, 2019 12:27 pm
The notion that saving taxes is somehow a "jerk move" is an alien concept to me.
It is written, "God loves a cheerful giver. It matters not if thou stiffest the IRS"
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Re: Gold taxation thoughts

Post by vnatale » Sat Dec 07, 2019 7:10 pm

sophie wrote:
Thu Dec 05, 2019 8:30 am
Actually Vinny, there's no problem at all if ochotona sends the money to a donor advised fund.

DAFs are really nice, as they separate the decisions of how much & when to set aside for charity to which organizations & how much each to favor. Basically since discovering those I will never donate by check again. It'll always be highly appreciated shares. I simply then buy back the same # of shares with the money set aside for charity. Then I get the charitable deduction on the full amount (since I already itemize) AND avoid capital gains tax on the appreciated portion of the donated shares.

The math, for me, works out to a total tax savings of 60% of the donated amount, assuming the shares have appreciated exactly 100%. In other words, a charitable donation of $100 actually costs me only $40. Crazy!

I bet there are people who are quietly managing to figure out a way to game this system to their taxation advantage. Something like creating a charity and then funneling money back to themselves for administrative expenses. I'm sure that's illegal but you can see how great the temptation is.
I agree with you on the major but disagree on the minor.

The major agreement is the value of using a donor advised fund.

I donate Vanguard mutual funds.

It had been major ordeal to donate them prior to opening a donor advised fund. Because they were mutual funds and going to third parties, those third parties HAD to have an account with Vanguard to accept them.

For one organization I'd have to help them set up the Vanguard account, they'd receive my shares, liquidate them and close the account. Which meant the next time around I had to repeat the same time consuming process. And, also because they were mutual funds, Vanguard wanted instructions by about mid-December to promise a December 31st transfer.

In 2012 when I was discussing this ordeal with a friend he asked the simple question, "Why don't you open a donor advised fund?" I did (with Vanguard) and have never looked back. Since both the mutual fund and the donor advised funds are with Vanguard, I get a one day turnaround on the transfers which allows me to delay the decision of what to donate much closer to December 31st.

The minor disagreement is the way I do my deductions.

One year I itemize. The next year I do the standard deductions. The year I itemize I pay / make all contributions / real estate taxes / state taxes for two years. The other year I don't pay a cent for any of them (or, at least that is the way it used to be before the latest tax act capped tax total tax deductions at $10,000).

There is a % limit of your adjusted gross income that you can deduction for donations in one year. Any excess gets carried over to the next year. If I have any of that it is completely wasted as I'm definitely not itemizing and taking the standard deduction.

I bought that up in reacting to Ochotona's comment of donating $50,000 at once. If I'd done that much it one year it would have definitely caused me wasted deductions.

Finally, how do you come up with your 60% amount?

If I bought something for $50 and donated it when it appreciated 100% to $100, I'd have a $50 gain. We both agree in donating it I avoid paying the taxes I'd owe if I just sold it.

In my case, I'm avoiding the 15% federal capital gains tax and 5% (Massachusetts) state tax. 20% total taxes or $10 in taxes on the $50 gain. Therefore the $100 donation after the tax savings still costs me $90, with only a total tax savings of 10% of the donated amount.

We are both in the United States so the same 15% federal capital gains rate applies to you. Therefore, the only difference is your state and local taxes being enormously higher than my 5%.

Vinny
Above provided by: Vinny, who always says: "I only regret that I have but one lap to give to my cats." AND "I'm a more-is-more person."
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