Charitable Donations of Appreciated Stock

by Amanda Domitrowich

If you are planning to make a relatively substantial contribution to a charity, college, etc., you should consider donating appreciated stock from your investment portfolio instead of cash. Your tax benefits from the donation can be increased and the organization will be just as happy to receive the stock.

This tax planning tool is derived from the general rule that the deduction for a donation of property to charity is equal to the fair market value of the donated property. Where the donated property is “gain” property, the donor does not have to recognize the gain on the donated property. These rules allow for the “doubling up,” so to speak, of tax benefits: a charitable deduction, plus avoiding tax on the appreciation in value of the donated property.

Example: Tim and Tina are twins, each of whom attended Yalvard University. Each plans to donate $10,000 to the school. Each also owns $10,000 worth of stock in ABC, Inc. which he or she bought for just $2,000 several years ago.

Tim sells his stock and donates the $10,000 cash. He gets a $10,000 charitable deduction, but must report his $8,000 capital gain on the stock.

Tina donates the stock directly to the school. She gets the same $10,000 charitable deduction and avoids any tax on the capital gain. The school is just as happy to receive the stock, which it can immediately sell for its $10,000 value in any case.

Caution: While this plan works for Tina in the above example, it will not work if the stock has not been held for more than a year. It would be treated as “ordinary income property” for these purposes and the charitable deduction would be limited to the stock’s $2,000 cost.

If the property is other ordinary income property, e.g., inventory, similar limitations apply. Limitations may also apply to donations of long-term capital gain property that is tangible (not stock), and personal (not realty).

Finally, depending on the amounts involved and the rest of your tax picture for the year, taking advantage of these tax benefits may trigger alternative minimum tax concerns.

If you’d like to discuss this method of charitable giving more fully, including the limitations and potential problem areas, please give us a call.

2019 Capital One Data Breach – 10 Ways to Protect Yourself from Identity Theft

by Amanda Domitrowich

In March of this year, Capital One was involved in a data breach which exposed the information of over 100 million U.S. and Canada customers. The hacker found a configuration vulnerability in Capital One’s infrastructure allowing access to typical credit card application data from consumers and small businesses who had applied for credit from 2005 on. Capital One has since fixed the configuration vulnerability and is working with law enforcement. Capital One will contact you via mail if you are a victim of the breach. Capital One has offered to provide free credit monitoring and identity protection to those affected.

What to do if you suspect you are a victim:

1.  Place a fraud alert
2. Contact fraud departments
3. Freeze your credit
4. Document everything
5. Create a recovery plan – https://www.identitytheft.gov/

Steps to take to prevent your identity and credit info from falling into the wrong hands:

1. Know who you’re talking to. Before you reveal any personally identifying information, find out how it will be used and whether it will be shared with others.
2. Pay attention to your billing cycles. Follow up with creditors if your bills don’t arrive on time. A missing credit card bill could mean an identity thief has taken over your credit card account and changed your billing address to cover his tracks.
3. Guard your mail against theft. Deposit outgoing mail in post office collection boxes or at your local post office—not in your own mailbox for your carrier to pick up.
4. Add multifactor authentication for your logins and other transactions. This is a second security step which requires more than one method of authentication before you can access your account.
5. Put passwords on your credit card, bank and phone accounts. Avoid using easily available information such as your mother’s maiden name, your birth date or your phone number.
6. Do not give out personal information on the phone, through the mail or over the internet unless you have initiated the contact and know who you’re dealing with.
7. Keep items with personal information in a safe place. To thwart an identity thief who may pick through your trash to capture your personal information, tear or shred your charge receipts, copies of credit applications and other financial statements.
8. Minimize the amount of identification information you carry to what you actually need. Don’t carry your social security card—memorize the number and store the card in a secure place.
9. Monitor your credit reports.
10. Keep passwords secure.

For more tips and information, visit the FTC’s website.