The close of the year
is a traditional time to review your capital gains and losses,
including those not yet taken by closing out existing positions.
Often it is a prudent time to offset a gain with a loss to
minimize tax implications.
Remember, in planning donations it is usually
advantageous to donate highly appreciated securities rather than cash, since you
can avoid the capital gains taxes on the gains while still gaining the full
deduction for the donation. Your recipient can then liquidate for its own
purposes.
If you are donating assets other than
marketable securities, you will also want to obtain a qualified appraisal. All
of this takes time and planning.
An often overlooked device is the
"charitable remainder trust" as an element of portfolio planning. It is possible
to transfer some of your assets into a trust, which will provide an immediate
tax deduction, defer capital gains taxes, and yet still allow you to retain the
benefits (income) from a portfolio during your lifetime.1
This technique is often used to dispose of highly appreciated assets.
What is also often overlooked, however, is
that it can also prove effective for an income producing portfolio which has
suffered a serious decline in market value.
What does one do if one is dependent upon the
income from a portfolio that has significantly dropped in face value? You can
place the securities (with the losses) into a specially created charitable
remainder trust that will benefit some ministry of your choosing upon your death
or the death of your spouse.
You can claim an immediate tax deduction on
the charitable contribution while still enjoying the income from the trust
during your lifetime (and that of your spouse).
Using such a structure, you could place your
income-producing assets into a vehicle where you will be able to take a much
larger deduction than you would be able to take on ordinary capital losses
(since you deduct the principal) and your trades from that point forward would
be free of concern about capital gains tax.
See your advisor to explore the possibilities.
New Year’s Resolutions
This is also the time for planning other
personal goals for the coming year. It would be a good time to also lay out a
specific plan for your spiritual "portfolio" for the coming year: a
personally tailored program of expositional Bible study for the coming year, for
example, see our commentaries.
It’s a good time to consider a personal
commitment to a specific book (and a budget for commentaries and helps!), or
even plan to undertake a review of the entire Bible
What a perfect time to get a study Bible for
each member of the family and set aside a specific time for study together!
Or maybe it’s time to teach a home
Bible study. There’s no better way to "learn" a book of the Bible than to teach
it, a chapter a week, to a small group.
Pray about it.
In any case, make your spiritual
priorities part of your New Year’s resolutions!
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