Using appreciated stock held over a year to fund a significant contribution to a public charity instead of cash can result in a “double play”. You can get the benefit of a deduction equal to the full fair market value of the shares and at the same time avoid paying capital gains tax on the appreciation.
Making a charitable contribution using publicly traded stock is fairly simple. For contributions of more than $5,000, you must attach Form 8283 with a description of the shares contributed, their fair market value, how you acquired the shares and your cost basis. In addition, as is true for all contributions over $250, you must obtain written contemporaneous acknowledgement of your contribution from the charity, which must include a statement that you did not receive anything of value in return for making the contribution.
The same result can be attained with a charitable contribution of non-publicly traded shares. However, for gifts valued at more than $10,000, there is an additional requirement. In order to secure a deduction, you must get a “qualified appraisal”. A qualified appraisal is a complex and detailed document, which must be prepared and signed by a “qualified appraiser”. While it generally does not have to be attached to your tax return, the appraisal must be obtained before the due date, including extensions, for filing your income tax return on which the deduction is claimed.
We are often asked about charitable contributions involving non-publicly traded stock and business interests, where the appraisal requirement seems redundant and completely unnecessary. Consider a contribution of an interest in a partnership whose units are freely exchangeable for shares of publicly-traded stock; or, a contribution of shares in a corporation whose shareholders are subject to a “buy-sell” agreement, which clearly sets the value of the shares; or, a contribution of shares in a closely-held corporation whose shares have traded in many arms-length transactions during the year. Unfortunately, even when an appraisal is redundant, the Code and Regulations strictly require that you get an appraisal.
What if you have made a significant charitable contribution of appreciated non-marketable securities in 2016 and you have not yet obtained a qualified appraisal? You should consider requesting an extension to file your 2016 income tax return before the April 18, 2017 deadline, so you have until October 15 to get your qualified appraisal. No appraisal means no deduction, or at best, your deduction will be limited to your cost basis instead of the fair market value.
CONSULT YOUR TAX ADVISER — this article contains general information about various tax matters. You should consult your CPA regarding the implications to your own particular situation. George Ashley is a shareholder in Ashley Quinn, CPAs and Consultants, Ltd., with offices in Incline Village and Reno. He may be reached at 775-831-7288, and welcomes comments at GAshley@ashleyquinncpas.com.
All deadlines have more or less equal implications, but some deadlines are more equal than others. This one looms – no later than June 30 upcoming!
By law, many U.S. folk with foreign accounts exceeding certain thresholds must file Form 114, “Report of Foreign Bank and Financial Accounts” (aka “FBAR”) electronically with the Treasury Department’s Financial Crimes Enforcement Network (“FINCEN”). Read the rest of this entry »
We’ve been preaching that note for decades – but some folk just don’t seem to get it, and refuse to look after their own savings needs, expecting they will be spending each summer on the Riviera. It just doesn’t work that way.
The Tax Foundation has a good recent report on the matter, which those who don’t believe us may want to scrutinize. Recalling that Social Security benefits alone are simply not adequate to replace retirement income, millions of Americans just save too darned little to support their preretirement living standard when the time comes to stop working. Indeed, many folk have exactly zero retirement savings, in the form of an IRA or other tax-favored retirement plan! Can you believe it?! Read the rest of this entry »
Seems as if that’s pretty much how it’s looking – the House Judiciary Committee has scheduled hearings to examine alleged misconduct by Commish Koskinen, we hear. On May 24 (just next week) the Judiciary Committee will hear the findings of the House Oversight and Government Reform Committee’s investigation of the Chief Revenooer!
Congressman Jim Jordan (R-Oh) has expressed his view thusly: “I applaud Chairman Goodlatte’s decision to hold hearings on the resolution for impeachment of IRS Commissioner John Koskinen. Commissioner Koskinen failed to fulfill his duty to the American people by allowing back-up tapes containing potentially 24,000 emails to be destroyed. He failed to inform Congress about the destruction of these back-up tapes in a timely manner……Alexander Hamilton wrote in the Federalist papers that impeachment should be used to protect the public against ‘the abuse or violation of some public trust.’ Commissioner Koskinen has most assuredly violated the public trust…….” Read the rest of this entry »
Tax Freedom, that is! You actually just achieved it about a week ago, according to the Tax Foundation. “Tax Freedom Day” 2016 just passed – on April 24, or 114 days (not counting “Leap Day”) into the new year. And indeed, “Freedom” comes one day earlier than last year!
That’s the good news. You will mope when you hear that Americans will spend more on taxes in 2016 than they will on food, clothing, and housing combined! And when you include Federal borrowing, Tax Freedom Day won’t hit until May 10! (The latest ever deficit-inclusive Tax Freedom Day occurred during World War II – on May 25, 1945.) Read the rest of this entry »
So you think the fact that you spend some big bucks on the clothes you wear to work – in order to impress your customers and others – is reason enough to have Uncle Sam subsidize your expenditure.
Not so, say the Revenooers, as most recently expressed in the Tax Court case of Sofien Beltifa. This guy was employed by a restaurant in New York City in 2011 as a bartender/manager. His duties included “calling in” liquor orders, taking liquor deliveries, and ensuring that the bar was fully stocked at all times. The restaurant did not require its employees to wear a uniform, though it did request employees to wear an all black ensemble (shirt, tie, pants) while working. The taxpayer believed it was necessary to look his best because he was one of the faces of the restaurant. “When you enter, you just see me and then you walk through,” he testified. “You see the host, you see me. I’ve got to look presentable.” Read the rest of this entry »
Always vigilant to the endless raft of tax shenanigans going on out there, IRS has released its latest list of favorites – warning taxpayers to be alert to the most egregious potential problems lurking.
- Identity theft – This is the biggie. IRS continues to hunt down and prosecute the crooks filing false tax returns using other folks’ social security numbers to secure refunds to which the bad guys are not entitled.
- Phone scams – We’ve even received one of these – a call from a bad guy impersonating a real Revenooer claiming that unless we pay (a phony “unpaid tax” amount) arrest and other bad things awaits us.
- Phishing – Though IRS never communicates with taxpayers about unpaid balances, the bad guys do, in an effort to steal personal information. IRS warns you to be wary of strange emails and websites that are likely nothing more than invitations which, if accepted, will expose your personal information to theft.
- Return preparer fraud – Deal with reputable professionals only, and beware of preparers, for example, who may pop up with a store front near you, promising all kinds of tax goodies if you engage them.
- Offshore tax avoidance – IRS has gotten pretty good at nipping this one in the bud, but some folks still think they can hide assets and/or income abroad, keeping IRS at bay. This can be really bad medicine and folks who play this game will find their pocket book much lighter if/when IRS catches up, not to mention the possibility of a stay in the slammer.
- Inflated refund claims – Stay away from any preparer who asks you to sign a blank return, promises a big refund before even reviewing your records, or charges fees based on a percentage of your refund!
- Fake charities – Make sure your donations go to only legit charities and not ones with “sound alike” names to those we all know and love. If in doubt, check with IRS first (www.irs.gov) who keeps a list of all charities which are truly tax exempt organizations.
- Falsely padding deductions on returns – this one speaks for itself. Obviously a “no-no.”
- Excessive claims for business credits – The fuel tax credit and research credit are high on IRS list of those credits which often are used by cheaters.
- Falsifying income to claim credits – IRS warns you not to “invent” income so you can incorrectly qualify for such items as the earned income tax credit!
- Abusive tax shelters – This one, too, used to be of more concern to IRS, which has become pretty good at shutting down these tax avoidance schemes, and even putting some of the folks pushing them in the clink. If a peddler tries to sell you on one of these, and it “sounds too good to be true,” the likelihood is that it is.
- Frivolous tax arguments – Believe it or not, there are still some promoters out there who try to encourage taxpayers to make unreasonable and outlandish claims (often based on phony constitutional arguments, or claiming that the income tax law is illegal) in an effort to reduce one’s tax liability. Amuse yourself by reading about these blokes and their ridiculous arguments, but that should be as far as you go. And by the way, the penalty for filing a frivolous return is $5,000. Read the rest of this entry »
Comforting, isn’t it? To learn that IRS has adopted policies that prohibit its employees who cheat on their own taxes to work for Uncle Sam!
“I have no indication that anyone working for the IRS has not followed the updated procedures,” quoth Commish Koskinen in recent testimony before the Senate Finance Committee.
Recall that a report last year by the Treasury Inspector General for Tax Administration (TIGTA) found that 1,580 IRS employees had willfully failed to pay their taxes. Of those, TIGTA found 61 percent retained their jobs. Read the rest of this entry »
REVENOOER RANTS – 2/8/16
Lest we be chastised for not giving credit where credit is due, we have to hand it to Obama for recently announcing much needed retirement incentives which will be included in his 2017 budget to be announced this week. The simple fact is that, unlike the situation in our parents’ generation, most folks just don’t work their entire career with one company, which typically stashed away dough to fund employees’ retirement years. Further, Obama notes that fewer than 10% of workers without access to a workplace retirement plan contribute to a retirement savings plan of their own. So, government now proposes to encourage more employers to offer plans and create alternative savings arrangements for folks whose employer does not offer a plan. To wit:
- A proposal to triple the existing “startup” credit so small employers which begin offering a retirement plan would receive a tax credit of $1,500 per year for up to three years. Further, small employers which already offer a plan and add auto-enrollment would get a tax credit of $500 per year for up to three years.
- For the benefit of part-time workers, a proposal to require that employees who have worked for an employer for at least 500 hours per year for at least three years be eligible to participate in the employer’s existing plan.
- A proposal which would require employers with more than 10 employees who do not presently offer a retirement plan to automatically enroll their workers in an IRA. Employers with 100 or less employees that offer an auto-IRA would receive a tax credit of up to $3,000.
- A proposal to increase the “portability” of retirement savings, in cases of employees who change employers through the course of their working life. Read the rest of this entry »
Seems like an issue which just won’t go away – the question of whether a worker bee is an employee, or an independent contractor. Makes a big difference in how the bloke reports his expenses. If he’s an employee, those expenses go on Schedule A as itemized deductions, and are likely to be subjected to some limitations in the deductible total. If he’s a contractor, the expenses go on his Schedule C, and further any net profit he reports there can qualify him for retirement plan deductible conributions as well.
So here comes taxpayer Jorge Quintanilla who, the Court notes, is an exceptionally skilled production worker on approximately 150 commercials shot in Southern California. Jorge believed he qualified as a contractor and reported his expenses on Schedule C as noted above. The Court further notes that the legal distinction between an independent contractor and a common-law employee is settled as a general matter, though it’s often murky in application. Courts of various stripes, however, have set forth certain factors over the years, intended to guide one to the proper conclusion as to employee versus contractor, including: Read the rest of this entry »
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