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Bob has a stock that is worth 50% more than what Bob paid. Bob would like to avoid paying tax on the gain so he donates 10% of the shares shares to a charity through a donor-advised fund.

Bob decides he'd like to buy some more stock in company A the day after he donates his shares. Does Bob have to wait 30 days to avoid a wash sale?

  • If Bob is thinking that he can deduct the appreciated value from his taxes without paying taxes on that appreciation, he's wrong. – David Schwartz Jan 18 at 20:03
  • @DavidSchwartz Why is he wrong? – Seth Jan 18 at 20:25
  • Say he bought the stock for $10 and it's now worth $15. If he wants to claim that he donated something worth $15, then he had to have something worth $15 to donate. If he turned something he bought for $10 into something worth $15 that he could do whatever he wanted with, he has a $5 taxable gain. If he wants to donate the stock "as is" without recognizing its appreciation as income, he cannot claim he recognized its value as $15. He can do one or the other and it affects the recipient's basis. (There are narrow exceptions with holding restrictions and amount limits.) – David Schwartz Jan 18 at 21:07
  • @DavidSchwartz I don't think you're correct. If you gift the stock, you're able to deduct the current fair market value as a charitable contribution regardless of your basis. – Seth Jan 18 at 21:41
  • It is possible to do that under a set of narrow circumstances, but it's far from automatic. – David Schwartz Jan 19 at 0:09
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Wash sale rule is for stocks sold at a loss, so in the scenario you describe there is no issue with donating and re-buying.

If the value had dropped in your example it would make more sense to sell, take advantage of the loss, and make a cash donation for additional tax benefit (assuming already itemizing of course). They would have to wait to re-buy in this case.

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The answer “nothing to do with wash sale” is correct. But your numbers are off. Sell $150 in stock for a $50 gain and you’d need to donate $50 worth of shares to offset the tax due. And this is only if you itemize. With the new tax code, more people will not itemize, and will only get good karma from donations, no tax benefit.

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