johnson@saturn.UUCP (Mark Scott Johnson) (03/23/84)
> Mark Scott Johnson doesn't know of anyplace in the tax code that allows > something to be deducted twice. Here is one: > Say you have owned some investment (stock, gems, collectibles, > whatever) long enough to qualify for long term capital gains, and the > time has come to sell at a profit. If you wish to make a donation to a > charitable organization, you can get a double deduction by giving away > the investment. Since the item is not sold, no tax is paid on the > gain. The "fair market value" however may be taken as a deduction. I only count one deduction here--when you give the investment away. The original cost of the investment was NOT deducted previously. What's described above is a tax-free transaction (the capital gains on the investment is forgiven). There are LOTS of tax-free transactions (e.g., municipal-bond dividends, like-kind property exchanges, scholar- ships, loan proceeds, honoraria from professional societies). -- Mark Scott Johnson CSnet: Johnson@HP-Labs USENET: ...!ucbvax!hplabs!johnson
btb@hogpc.UUCP (B.BURGER) (03/25/84)
> (Paraphrasing) A: It's a double deduction when you give something > to charity, deducting the market value but not paying taxes on > the capital gains you'd ordinarily be liable for. > (Paraphrasing again) B: No, I only count one deduction -- at the time > of donation. B is literally correct but what A *meant* to say (wow, I'm a mindreader) is correct: Of course, there's only one deduction. But usually (e.g., with interest on mortgage payments), deductions are for amounts you also paid. A deduction isn't the gift from God some people think it is, just a statement that "you don't have to pay tax on this amount because, even though you earned it, you didn't *keep* it." On the other hand, in the example here, the donator is deducting an amount that he never paid. All that was paid was the purchase price, not the market value. So it's a less "fair" deduction than most. Note, though, that the donator would still make out better by selling the item and keeping the money (100% of the purchase price and about 80% of the capital gains after taxes) than donating and deducting (which is equivalent to saving 50% of the total market value). The only way it's *financially* worth contributing to charity under this scheme is by overestimating the market value, which is illegal although difficult to enforce against. --Bruce Burger AT&T-Information Systems Lincroft, NJ {...ihnp4!}hogpc!btb