The Grumpy Economist

The new tax law’s treatment of deductions provides people more reasons to concentrate giving in certain years, both inside and outside donor-advised money. A donor-advised finance is an investment account held for charitable purposes. Donors take taxes deductions when they put profit, then recommend grants or loans to charities over time.

30,000 to a donor-advised finance run by the Los Altos Community Foundation. His plan: alternate years between taking the standard deduction and donating to his account and declaring itemized deductions. 24,000 per calendar year standard deduction. 24,000 free deductions. Pile all the real deductions into other years. In economics, we call this “convexification”.

There are lots of smart ways to pull lines through a stair step. 50,000 to charity in alternate years, and let the charity place it in the lender. Donor-advised funds are of help if you think your local charity’s endowment investment policy isn’t that smart. If they spend money on obscure high-fee hedge funds and private equity deals and you’d rather they invested your money in transparent low-fee assets, setup a donor-advised account then.

In an uncommon instant of sanity and good Federal government from my ex-home state, Marc Levine, chairman of the Illinois state table of investment, took all of Illinois’ pension resources out of high-fee obscure hedge funds. Industry “experts” recommended we keep these investments to diversify our holdings and reduce overall risk.

  1. Main Street Capital (MAIN) – sold 500 shares and reduced position to 250 stocks
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Yet we already possessed bonds for your purpose. Our Procter & Gamble bonds made sense to us. Tonight I’m confident my children will brush their teeth. But I don’t have a clue about that long-lumber, short-sugar trade. Did anyone at the desk understand what these hedge money was doing really?

Should we be placing the retirement funds of Illinois state employees into investments that not just a single trustee, expert, or staffer could clarify? Donors who give appreciated assets get an extra benefit: They avoid paying capital-gains taxes when they make the donation, and a deduction is got by them against their income taxes for the entire value of the asset. 100, give the stock to your favorite charity (Hoover!).

100 in addition to the capital gains taxes as a deduction. It gets better though. Give a non-market asset to your favorite charity. You can see both you and the charity have every motivation to record fanciful beliefs for the asset. 200 for the IRS. You can actually generate income out of donations Now.

Conservation easement syndications (here, here and most fun here is even better. Millstone golf course outside Greenville, S.C. Later in 2016, however, a pair of promoters made an appearance. 41 million, almost eight times its purchase price. 1 they invested. .9 in tax deductions for every dollar they make investments. There are several ways to interpret all of this.

One can enjoy the creativity of the American tax lawyer and rich buyer. Who said development has fled the US? Obviously, I’m not such a fan. The funds tend to be invested in vehicles maintained by those companies and generate fees for the for-profit business. As well as the lawyers who set up conservation trusts and the lobbyists who keep them in the taxes code, are all taking their slice too.

But even that is not the most irritating part. Now, on top of everything else, a smart taxpayer must setup a donor suggested funding, sign a lot of papers, each year, and manage it. Already, normal citizens need to have trusts to manage estates perfectly, and a huge selection of pages of tax forms each year. The needless complexity of life in the Republic of Paperwork is, if you ask me, the most annoying part. We are in need of a grand simplification of our open public life. If this is exactly what it leads to, the complete charitable deduction thing should get tossed overboard.