Smart Year End Tax Moves Part 3

I have focused a lot of attention in the last week on retirement plans. In this post I will change gears a bit to focus on stock sales.



Recently there has been a lot of focus on stock sales as the bush tax cuts were set to expire, fortunately for most taxpayers, Congress extended the bush tax cuts to all individuals for two years. However, this doesn't mean there aren't things that people should be doing to put themselves in the best tax position.

Two smart year end tax moves that could really pay.

First, if you are planning to gift stock you should consider the best way to gift that stock.

If you are planning to give the stock to a charity, consider this. If the stock has lost money since you bought the stock, you should strongly consider selling the stock and giving the money to the charity. It is important to note that if you were to give the stock directly to the charity, your deductible contribution would be the fair market value on the date of contribution. So the only way to capture the loss, while you held the stock, would be to sell the stock, capturing the loss, and subsequently giving the money to your charitable organization.

The same rules apply when you give stock to family members (as gifts). So it only makes sense to sell the shares and give them the cash. If they choose they can take that money and buy the exact shares you just sold and their basis would equal the cash they received.