Monday Money Tip At year s end sell losing stocks and gift winners

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Monday Money Tip At year s end sell losing stocks and gift winners
Erin E. Arvedlund, Inquirer Staff Writer

Last updated: Monday, November 24, 2014, 1:08 AM

Sell your losers. Gift your winners.

It’s nearly December, time to evaluate your portfolio and sell off some losers. With the stock market setting records, investors have recorded terrific gains and can harvest tax losses to offset those, says Brad Bernstein of UBS.

Take losses now, says Bernstein, a UBS Wealth Management senior vice president in Center City. He has been swapping out under-performing mutual funds, reaping the losses, and swapping into better-performing mutual funds and exchange-traded funds.

Selling a losing security allows you to book a loss. You can use those losses to offset capital gains and lower your overall tax bill.

A fund I like is Oakmark International [OAKIX]. They’re phenomenal, but they had a bad year, down about 5 percent, Bernstein explained. I swapped out of that and into the Dodge & Cox International Fund [DODFX], which outperformed.

They’re similar international large-cap funds, but my clients then get a long- or short-term loss and can use that to offset gains.

Other ideas: Sell iShares Russell 2000 ETF (IWM) small-cap index and buy into Vanguard Small-Cap ETF (VB), up 5 percent this year, he says.

Give away your winners?

Yes, says Eileen Heisman, of National Philanthropic Trust. If you hold highly appreciated securities and want to donate charitably at year’s end, here’s what not to do.

Don’t sell the stock or bonds yourself, then donate the money to your favorite cause.

Instead, donate the securities directly to the charity, Heisman advises.

Everyone wins that way: You receive the entire value of the gift as a tax deduction — instead of selling yourself and paying capital-gains taxes.

Anyone can use this strategy, not just people of means, says Heisman, a philanthropy expert and CEO of National Philanthropic Trust.

You can gift almost anything: a holding in a private family business, securities, even Bitcoin, she added.

One of her donors left a share of a coin collection to charity. Delaware Valley Rare Coin Co. in Broomall appraised the collection, which National Philanthropic Trust then sold tax-free, and the funds were deposited into the donor’s charity.

Say you donate 100 shares of Apple stock to your church, synagogue, or local cause. Call your broker, which will wire instructions to transfer your securities to the charity’s account. The charity then sells the donated securities tax-free.

You, the donor, don’t record capital gains and instead get a full tax deduction of the fair market value (minus transaction fees).

Don’t wait until Dec. 31, because it may take a few days for a transfer, and you would miss out on the deduction for 2014.

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