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!
* * *
