Turbo Tax Surprise with Stock Gift

[nwsteve]

Perhaps I am the only person to experience this "gotcha" but thought I pass it along as a "watch out" for those still finishing their taxes
In TTax when you complete the stock gift questions, there is a dialogue box that asks you to enter the date of purchase and basis of your stock being gifted.
I originally answered "various" as the lots were all long term but of varying purchase dates. BAD IDEA. If TTax does not know it is long term (needs a date entered that is clearly LT), you only get a deduction credit for your purchase basis.
Apparently, only long term positions are eligible for receiving FMV credit to the charity. TTax "help" explains it as only LT gains received special treatment and all short-term would have been treated as ordinary income so only original cost were deductible.
Personally I never heard of this change so it was an eye opener.
Nwsteve

 

[audreyh1]

Yes, only long term appreciated stock is eligible for special treatment when donated to charity.

 

[Texas Proud]

Can you not enter a date VAR-L? I remember doing that in previous years for stock sales and it put it in LT gain...

 

[Gill]

That's been the law since I studied tax law 50 years ago.
Bruce


Sent from my iPad using Early Retirement Forum

 

[nwsteve]

That's been the law since I studied tax law 50 years ago.
Bruce /QUOTE]

Well, guess not having studied tax law formally, I guess I missed that chapter ;-). But then again, I only started giving stock relatively recently.

Good news is that my stock donations have all been long-term, so no need to do any amended returns for that gap in knowledge. Doing the TT questionnaire, just made the rule obvious.
Thanks to all for the perspective
Nwsteve

 

[audreyh1]

A Fidelity Charitable write up on it made the long-term requirement clear.

http://www.fidelitycharitable.org/giving-strategies/tax-estate-planning/appreciated-securities.shtml

 

[nwsteve]

A Fidelity Charitable write up on it made the long-term requirement clear.

Donate Appreciated Securities | Fidelity Charitable

Thanks for the link--very clear. The long term component as taxable term vs short term, just never registered in the brain as it related to a stock gift.

 

[LOL!]

My impression is that no one reads the IRS instructions anymore and especially not the IRS publications on tax matters. For instance, there is one on charitable contributions: https://www.irs.gov/pub/irs-pdf/p526.pdf

In the old days (pre-TurboTax, pre-TaxAct, pre-software), there was no way to do one's own tax return without reading these things. I guess software has made us less likely to know the rules. Some folks don't even look at their return before e-filing.