Question

Distribution directly to a Charity--is it supposed to be taxed?

Forum|Forum|6 years ago
February 20, 2020
2 replies
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My wife and I have a joint investment account. We had heard that we could sell shares and send the proceeds directly to a charity and thus not pay taxes on the sale. So, we filled out the investment company's form to have it done that way.

The charity confirmed they received the donation directly from our investment company.

I just went online to download our 1099-DIV, and it shows that the entire gift amount was charged to us as a box 1d. net proceed.

Of course, when I enter that amount in TurboTax, our taxes go way up. Were we wrong?

What should we do?

Not A Product Question

LudwigVan_fan

Employee

In my opinion, I think the selling of the shares and donating the sale proceeds is a taxable event.

If instead of selling the shares, you would have donated the actual shares or part of the investment account, then there would be no income to report.

Unless there was substantial capital gain or ordinary income, your taxes shouldn't go up hugely...unless we are talking very large sums. What you would report is the gross sales proceeds and subtract your basis in the shares sold...and then report on Sch D the capital gain.

Here is a link to Publication 526, Charitable Contributions

https://www.irs.gov/publications/p526#en_US_2018_publink1000288438

**Disclaimer: Effort has been made to offer correct information; but due to the discussion forum limitations, the poster disclaims any legal responsibility for the accuracy of the poster's response**

KathrynG3

Unfortunately, the transfer to charity and have no taxes it must be donated from a retirement account.

That type of donation is called a Qualified Charitable Distribution, or QCD. When funds are donated this way, the income you would have received from a required minimum distribution is not taxed. There is no additional deduction for the charitable contribution.

The way your transaction occurred requires reporting the transaction on your return. However, you can deduct the full fair market value of the sale as a charitable contribution. See IRS Publication 526 page 11 for Capital Gain Property.