8 ms·

This article makes my head hurt, as do so many discussions of charitable giving. The only reason to give to charity is to benefit that charity. Yes, donors ge

This article makes my head hurt, as do so many discussions of charitable giving. The only reason to give to charity is to benefit that charity. Yes, donors get a deduction for charitable giving. But they are ALWAYS better off (in terms of money received in their bank account) by NOT GIVING TO CHARITY. There is no way to give money to charity in such a way that you end up with more money than if you had not given to charity. The article points out that there can be some hedging; the assets donated can be managed and management fees paid to a manager before liquidation. And the particulars of the valuations mean that they can sometimes get a larger deduction than if they sold the asset and then donated the proceeds to charity. And there are loopholes that allow them to claim a larger deduction than the maximum deduction allowed in the tax code. But no matter what, if they just sold the damn asset and kept the money, they would have more money at the end of the day than they would having gone through this rigmarole.

izzydata 8y ago
I get what you are saying, but if the charity is for a thing that you want to see grow then you are essentially spending money on yourself. These people probably have so much money that funding a new public building in the spot of their choosing could be like buying a new car.
lotsofpulp 8y ago
Donors are not always better off not giving to charity. There are many ways to corrupt the "charity" by designating it for purposes that solely benefit the donor or their tribe, in which case the "charity" simply ends up being a vehicle used to obtain a tax subsidy (the taxes not paid by the donor) for the donor's causes, which may not benefit society.
- rectang 8y ago
  A 501(c)(3) that uses tax-deductible donations for commercial purposes is illegally violating its charter and is subject to enforcement action by the IRS. Note that a 501(c)(3) non-profit charity is different from 501(c)(6) non-profit business league. Donations to a 501(c)(6) are not tax-deductible, so how they are spent is not restricted -- and thus 501(c)(6) organizations are more subject to influence by their donors.
  - dddddaviddddd 8y ago
    The angle may ideological rather than commercial.
  - Terr_ 8y ago
    When there's no enforcement, the rules don't matter. A particularly timely example would be to look at what Donald Trump's 501c3 has been up to over the last several years.
jdavis703 8y ago
Let's say you're a wealthy individual who loves the outdoors. You could donate or start a land trust that let's you and your friends have exclusive access to a natural area. You could also write the donation of your taxes.
- gambiting 8y ago
  And....how is that a bad thing? If that money goes towards creating, maintaining and protecting natural land in its original state, then how is it bad?
  - senorjazz 8y ago
    because you have just bought yourself a private park at a heavy discount because it is for "charity". Yet it is for your own exclusive use.
    - roenxi 8y ago
      Honestly it is a bit of a stretch to call that a bad outcome for anyone. It seems pretty obvious that in this example there will be a lot of benefit to society in a generation or two. The preservation benefits of the local wildlife alone sound like a win. The tax deduction seems pretty reasonable for giving up control of a large chunk of land. On the one hand, maybe our hypothetical wealthy person get special access. On the other hand, they have given up the right to change their mind and have the land logged and then strip-mined. The giving-up-of-an-economic-resource aspect is significant enough that a reasonable government could compensate the individual for it, the long term benefits seem to be present and our wealthy friend has committed himself to a course of action.
    - zip1234 8y ago
      A potential benefit being that it is preserved for the future and public funds are not used to preserve it. Yes, in the short term, someone gets a tax incentive. In the long term, that land is preserved.
    - gambiting 8y ago
jkestner 8y ago
"On the night that he won the Palm Tree Award for his philanthropy, Trump may have actually made money. The gala was held at his Mar-a-Lago Club in Palm Beach, and the police foundation paid to rent the room. It’s unclear how much was paid in 2010, but the police foundation reported in its tax filings that it rented Mar-a-Lago in 2014 for $276,463." https://www.washingtonpost.com/politics/how-donald-trump-retooled-his-charity-to-spend-other-peoples-money/2016/09/10/da8cce64-75df-11e6-8149-b8d05321db62_story.html https://www.washingtonpost.com/politics/how-donald-trump-ret...
- Double_a_92 8y ago
  That doesn't really relate to donating. It's more of a lucky "coincidence". Trump owned the building and he rented it to people to host some party, that's where his profit came from.
gph 8y ago
Sort of. But considering that they are diverting a ton of tax revenue into charities, and the fact hat being a large donor to various charities and endowments can create large status and influence gains, especially for their legacy heirs, I think it's completely fair to ask whether this is truly charity or rich people setting themselves, their families, and their pet causes to be better off in the future instead of paying their fair share of taxes that could be used in a more direct way for the betterment of all in society (I know that's a contentious statement given our current government/politics, but we shouldn't write policy to allow diverting taxes for personal gain just because the government can be corrupt/inefficient)
cowkingdeluxe 8y ago
This is not true for assets that change in value and illiquid/non-marketable assets. Example: Rich person buys asset for $10m. 3 years later gets it appraised for $75m, knowing full well that no one would actually buy it for that. Rich person then donates the '$75m' asset to charity. Rich person made more money via charity rather than trying to sell the asset for $75m. This is a very common strategy.
- MrEfficiency 8y ago
  That is the dream. But remember that the IRS doesnt care much about the 90%. They DO care about the 0.1%. Doing something like that is a high risk way of getting audited.
  - vinceguidry 8y ago
    There was just an article about how the IRS is doing fewer audits in recent years due to lack of resources and political cover.
    - sehugg 8y ago
      Propublica: After Budget Cuts, the IRS’ Work Against Tax Cheats Is Facing “Collapse” https://www.propublica.org/article/after-budget-cuts-the-irs-work-against-tax-cheats-is-facing-collapse https://www.propublica.org/article/after-budget-cuts-the-irs...
  - GFischer 8y ago
    But it's very hard to prove such fraud. If you artificially pump the value of an artist by a few well placed public auctions - the art might have been bought by a front man for the owner, then the IRS doesn't have a leg to stand on, as a "market value" for the artist has been established (my mother worked on auctions for a time and there were a lot of shady schemes to pump up value of collectibles). The 0.1 have access to the very best tax advisors money can buy (and probably some IRS insider info as well).
    - 8y ago
SeanAppleby 8y ago
Donor advised funds don't have a requirement on any cash outflows and charitable outcomes at any particular time, just that the funds eventually have to be allocated to charitable causes. They can also pay management fees on their capital. You can own the investment fund that is managing its capital. You can then bleed money out through those management fees while only paying capital gains on money when you take a specific amount out as carried interest, avoiding the majority of your capital gains liability on most transactions with most of your capital. I forget where I originally heard this from, but they claimed to have this setup and claimed it was common, and I have since ran it by multiple CPAs and have not yet gotten back an argument for specifically how this would be illegal.
- lazerpants 8y ago
  I work with lots of donors and their DAFs. Most people who use DAFs (from my experience) are just trying to smooth out their charitable giving so that they don't have to pay taxes during windfall years. They want all the money to go to charity but don't want to donate a huge amount all at once, especially given that many smaller charities are not capable of absorbing/utilizing windfall amounts, or they want to do research on charities before donating.
- URSpider94 8y ago
  I don’t believe that you, as the donor, could maintain control of the DAF - in other words, contributing to a fund from which you derived management fees. I have never heard of this being done, most DAF’s are run by independent foundations or by special wings of investment funds. So, it’s not that the donors are getting kickbacks in the form of management fees. It’s simply that people are upset that money is going into these funds and isn’t instantly available to charities. Never mind that many large charities like hospitals and universities run their own endowments that invest contributions.
GFischer 8y ago
You answered the point yourself: some of those "charities" are just tax loopholes. Especially those related to art: there's a loophole where the deduction is exponentially higher than the value of the donated art (on the article it's spelled out: If instead that asset is contributed to a DAF, an appraiser determines its fair market value before it’s donated. That yields a bigger deduction,), and even worse, the donor doesn't lose access to art, since he donates it to his private "museum" that's only open a few times a month or a year. https://www.nytimes.com/2015/01/11/business/art-collectors-gain-tax-benefits-from-private-museums.html https://www.nytimes.com/2015/01/11/business/art-collectors-g... http://law.siu.edu/_common/documents/law-journal/articles-2015/fall2015/8%20-%20Rodgers%20Comment%20-%20Proof%203%20Pending%20-sm.pdf http://law.siu.edu/_common/documents/law-journal/articles-20... And, as the article says, * their financial advisers may be allowed to direct how the money is invested and earn management fees.* , so they can still pump money into the companies they need to and extract wealth (very useful when pumping a private equity debt-laden corporation). And that's without getting started on how they have access to all the "charity's" assets, so they can use buildings, vehicles, even private jets on the "charity's" dime - see Ingvar Kamprad and IKEA: https://www.fastcompany.com/3035734/ikea-is-a-nonprofit-and-yes-thats-every-bit-as-fishy-as-it-sounds https://www.fastcompany.com/3035734/ikea-is-a-nonprofit-and-... So I don't agree that they're always better off not giving to charity. There are some legitimate charities, but there are also a lot of tax loophole charities.
- gamblor956 8y ago
  In your zeal to make a political point, you have selectively quoted from the article and the journal note. For starters, while a valuation firm can appraise art for more than the taxpayer acquired it, that valuation is subject to audit and the IRS can (and frequently does) disagree. As the deduction is a % of the value of the art donated, the deduction could never be higher than the value of the art, let alone "exponentially." Second, while private museums are a thing, the rules that a private museum must satisfy to qualify for non-profit status are fairly rigorous, and the scenario you describe would not qualify. Thus, a "donation" to the "museum" in your hypothetical would not yield a deduction. A donation to a DAF that loaned the artwork to that museum would likely violate self-dealing rules and lead to various sanctions, including potentially prison. IKEA isn't a US charity, so none of the rules we're discussing apply.
jakamau 8y ago
There's soft power gained by effective and selective charitable giving. Donating to specific major charities and organizations that operate at a metropolitan level can provide access and influence with other organizations and donors that can't be bought by any other avenue. Dollars and cents, you're absolutely right. But at a certain point, money isn't that valuable to the wealthy.
Ntrails 8y ago
> The only reason to give to charity is to benefit that charity. It also denies money from the government financed programs which you may not agree with, whilst allowing you to get your name on a building. The choice of how to distribute your tax outgoings is a simply a terrible idea.
usaar333 8y ago
> But no matter what, if they just sold the damn asset and kept the money, they would have more money at the end of the day than they would having gone through this rigmarole. Yes, that's true, but that ignores the personal benefits derived from giving to charity. (In theory, "personal benefit" portion can't be deducted - in reality, it can be). For instance, in the highest tax bracket in CA, donating $0 basis stock could result in your taxes being reduced by ~80% of the fair market value; i.e. you can donate $X by only paying 20% of X. As long as you derive more than 20% personal benefit from the charitable gift (and that's a low enough threshold it isn't that noticeable), giving to charity might beat selling that stock.
- URSpider94 8y ago
  The highest tax bracket in CA is nowhere near 80%. More like 50% (40% federal + 10% state). And appreciated stock held long-term is taxed at the Federal cap gains rate of 20%, so the max is closer to 30%.
  - usaar333 8y ago
    Highest bracket for ordinary investment income is 54.1%. 37% federal income, 13.3% state, 3.8% federal net investment. California uses same tax rate for long term cap gains. So highest long term rate is 37% (20% federal, 13.3% California, 3.8% net investment). If you sell and keep proceeds of $0 basis stock, you get $0.63 per $1. If you donate $1 of said stock, you get up to a $0.54 tax deduction. In this extreme example, there's only a 16% gain by selling vs donating.
maeln 8y ago
In some country, there is a cap where if you have more than X wealth/income, it will bump your tax rates by several percent. It use to be the case in France. With those kind of "for the super rich" taxes, it can be (depending on the implementation) more interesting to give enough of your wealth to charity to be under the cap.
solatic 8y ago
> There is no way to give money to charity in such a way that you end up with more money than if you had not given to charity You note that the particulars of valuations can allow people to claim a larger deduction than if they sold the asset and donated the proceeds. But that's precisely the point. If you have a $10 million tax bill, and you're looking to keep as much of that $10 million as possible, then donating an asset to charity with an optimistic valuation puts more money in your pocket compared to selling it for actual market value (especially since you would pay further taxes on the sale). The fact that you never see any of the money, because you took it as a deduction instead of a check, is irrelevant. At the end of the day, after your tax bill is settled, you have more money in the bank compared to selling, and that's all that matters.
gammateam 8y ago
> But they are ALWAYS better off (in terms of money received in their bank account) by NOT GIVING TO CHARITY. There is no way to give money to charity in such a way that you end up with more money than if you had not given to charity. No not necessarily, the charity's purpose itself can be to perpetuate and buoy a particular asset. It can be to develop the market for the asset. Lets say you own a housing community and benefit from the demand and price of that housing community. You can donate cash you have, borrowed cash, an underdeveloped property, a whole house, or even shares of the housing community project. In all of these circumstances you get a tax deduction, and yes that is moved off of your balance sheet. The charity could be formed for the purpose of building out the housing community and now it is funded and can do whatever necessary to make your housing community attractive, raising the value of all the rest of your assets. The charity isn't trying to make money (as revenues) so its doesn't encroach on commercial purposes. As the charity spends it gets no tax deductions aside from its exemption to taxes in general. But your benefit is still long term capital gains. Therefore when you are an individual, the benefit isn't that clear because couldn't you just get the deductions from your own expensable efforts? Typically you wouldn't be the only entity donating to this charity. Other people in your industry would be using it for the same purpose, letting it be an autonomous entity fulfilling its narrow purpose. So then the benefit becomes more clear.
dragonwriter 8y ago
> Yes, donors get a deduction for charitable giving. But they are ALWAYS better off (in terms of money received in their bank account) by NOT GIVING TO CHARITY. If that was actually true, giving to charity would be an aberration; in fact, giving to charity is done because it is seen to be advancing the giver’s interests, meaning they are, from an experienced utility standpoint (the only meaningful one), better off, not worse.

izzydata 8y ago

I get what you are saying, but if the charity is for a thing that you want to see grow then you are essentially spending money on yourself. These people probably have so much money that funding a new public building in the spot of their choosing could be like buying a new car.

lotsofpulp 8y ago

Donors are not always better off not giving to charity. There are many ways to corrupt the "charity" by designating it for purposes that solely benefit the donor or their tribe, in which case the "charity" simply ends up being a vehicle used to obtain a tax subsidy (the taxes not paid by the donor) for the donor's causes, which may not benefit society.

rectang 8y ago
A 501(c)(3) that uses tax-deductible donations for commercial purposes is illegally violating its charter and is subject to enforcement action by the IRS. Note that a 501(c)(3) non-profit charity is different from 501(c)(6) non-profit business league. Donations to a 501(c)(6) are not tax-deductible, so how they are spent is not restricted -- and thus 501(c)(6) organizations are more subject to influence by their donors.
- dddddaviddddd 8y ago
  The angle may ideological rather than commercial.
- Terr_ 8y ago
  When there's no enforcement, the rules don't matter. A particularly timely example would be to look at what Donald Trump's 501c3 has been up to over the last several years.

jdavis703 8y ago

Let's say you're a wealthy individual who loves the outdoors. You could donate or start a land trust that let's you and your friends have exclusive access to a natural area. You could also write the donation of your taxes.

gambiting 8y ago
And....how is that a bad thing? If that money goes towards creating, maintaining and protecting natural land in its original state, then how is it bad?
- senorjazz 8y ago
  because you have just bought yourself a private park at a heavy discount because it is for "charity". Yet it is for your own exclusive use.
  - roenxi 8y ago
    Honestly it is a bit of a stretch to call that a bad outcome for anyone. It seems pretty obvious that in this example there will be a lot of benefit to society in a generation or two. The preservation benefits of the local wildlife alone sound like a win. The tax deduction seems pretty reasonable for giving up control of a large chunk of land. On the one hand, maybe our hypothetical wealthy person get special access. On the other hand, they have given up the right to change their mind and have the land logged and then strip-mined. The giving-up-of-an-economic-resource aspect is significant enough that a reasonable government could compensate the individual for it, the long term benefits seem to be present and our wealthy friend has committed himself to a course of action.
  - zip1234 8y ago
    A potential benefit being that it is preserved for the future and public funds are not used to preserve it. Yes, in the short term, someone gets a tax incentive. In the long term, that land is preserved.
  - gambiting 8y ago

jkestner 8y ago

"On the night that he won the Palm Tree Award for his philanthropy, Trump may have actually made money. The gala was held at his Mar-a-Lago Club in Palm Beach, and the police foundation paid to rent the room. It’s unclear how much was paid in 2010, but the police foundation reported in its tax filings that it rented Mar-a-Lago in 2014 for $276,463." https://www.washingtonpost.com/politics/how-donald-trump-retooled-his-charity-to-spend-other-peoples-money/2016/09/10/da8cce64-75df-11e6-8149-b8d05321db62_story.html https://www.washingtonpost.com/politics/how-donald-trump-ret...

Double_a_92 8y ago
That doesn't really relate to donating. It's more of a lucky "coincidence". Trump owned the building and he rented it to people to host some party, that's where his profit came from.

gph 8y ago

Sort of. But considering that they are diverting a ton of tax revenue into charities, and the fact hat being a large donor to various charities and endowments can create large status and influence gains, especially for their legacy heirs, I think it's completely fair to ask whether this is truly charity or rich people setting themselves, their families, and their pet causes to be better off in the future instead of paying their fair share of taxes that could be used in a more direct way for the betterment of all in society (I know that's a contentious statement given our current government/politics, but we shouldn't write policy to allow diverting taxes for personal gain just because the government can be corrupt/inefficient)

cowkingdeluxe 8y ago

This is not true for assets that change in value and illiquid/non-marketable assets. Example: Rich person buys asset for $10m. 3 years later gets it appraised for $75m, knowing full well that no one would actually buy it for that. Rich person then donates the '$75m' asset to charity. Rich person made more money via charity rather than trying to sell the asset for $75m. This is a very common strategy.

MrEfficiency 8y ago
That is the dream. But remember that the IRS doesnt care much about the 90%. They DO care about the 0.1%. Doing something like that is a high risk way of getting audited.
- vinceguidry 8y ago
  There was just an article about how the IRS is doing fewer audits in recent years due to lack of resources and political cover.
  - sehugg 8y ago
    Propublica: After Budget Cuts, the IRS’ Work Against Tax Cheats Is Facing “Collapse” https://www.propublica.org/article/after-budget-cuts-the-irs-work-against-tax-cheats-is-facing-collapse https://www.propublica.org/article/after-budget-cuts-the-irs...
- GFischer 8y ago
  But it's very hard to prove such fraud. If you artificially pump the value of an artist by a few well placed public auctions - the art might have been bought by a front man for the owner, then the IRS doesn't have a leg to stand on, as a "market value" for the artist has been established (my mother worked on auctions for a time and there were a lot of shady schemes to pump up value of collectibles). The 0.1 have access to the very best tax advisors money can buy (and probably some IRS insider info as well).
  - 8y ago

SeanAppleby 8y ago

Donor advised funds don't have a requirement on any cash outflows and charitable outcomes at any particular time, just that the funds eventually have to be allocated to charitable causes. They can also pay management fees on their capital. You can own the investment fund that is managing its capital. You can then bleed money out through those management fees while only paying capital gains on money when you take a specific amount out as carried interest, avoiding the majority of your capital gains liability on most transactions with most of your capital. I forget where I originally heard this from, but they claimed to have this setup and claimed it was common, and I have since ran it by multiple CPAs and have not yet gotten back an argument for specifically how this would be illegal.

lazerpants 8y ago
I work with lots of donors and their DAFs. Most people who use DAFs (from my experience) are just trying to smooth out their charitable giving so that they don't have to pay taxes during windfall years. They want all the money to go to charity but don't want to donate a huge amount all at once, especially given that many smaller charities are not capable of absorbing/utilizing windfall amounts, or they want to do research on charities before donating.
URSpider94 8y ago
I don’t believe that you, as the donor, could maintain control of the DAF - in other words, contributing to a fund from which you derived management fees. I have never heard of this being done, most DAF’s are run by independent foundations or by special wings of investment funds. So, it’s not that the donors are getting kickbacks in the form of management fees. It’s simply that people are upset that money is going into these funds and isn’t instantly available to charities. Never mind that many large charities like hospitals and universities run their own endowments that invest contributions.

GFischer 8y ago

You answered the point yourself: some of those "charities" are just tax loopholes. Especially those related to art: there's a loophole where the deduction is exponentially higher than the value of the donated art (on the article it's spelled out: If instead that asset is contributed to a DAF, an appraiser determines its fair market value before it’s donated. That yields a bigger deduction,), and even worse, the donor doesn't lose access to art, since he donates it to his private "museum" that's only open a few times a month or a year. https://www.nytimes.com/2015/01/11/business/art-collectors-gain-tax-benefits-from-private-museums.html https://www.nytimes.com/2015/01/11/business/art-collectors-g... http://law.siu.edu/_common/documents/law-journal/articles-2015/fall2015/8%20-%20Rodgers%20Comment%20-%20Proof%203%20Pending%20-sm.pdf http://law.siu.edu/_common/documents/law-journal/articles-20... And, as the article says, * their financial advisers may be allowed to direct how the money is invested and earn management fees.* , so they can still pump money into the companies they need to and extract wealth (very useful when pumping a private equity debt-laden corporation). And that's without getting started on how they have access to all the "charity's" assets, so they can use buildings, vehicles, even private jets on the "charity's" dime - see Ingvar Kamprad and IKEA: https://www.fastcompany.com/3035734/ikea-is-a-nonprofit-and-yes-thats-every-bit-as-fishy-as-it-sounds https://www.fastcompany.com/3035734/ikea-is-a-nonprofit-and-... So I don't agree that they're always better off not giving to charity. There are some legitimate charities, but there are also a lot of tax loophole charities.

gamblor956 8y ago
In your zeal to make a political point, you have selectively quoted from the article and the journal note. For starters, while a valuation firm can appraise art for more than the taxpayer acquired it, that valuation is subject to audit and the IRS can (and frequently does) disagree. As the deduction is a % of the value of the art donated, the deduction could never be higher than the value of the art, let alone "exponentially." Second, while private museums are a thing, the rules that a private museum must satisfy to qualify for non-profit status are fairly rigorous, and the scenario you describe would not qualify. Thus, a "donation" to the "museum" in your hypothetical would not yield a deduction. A donation to a DAF that loaned the artwork to that museum would likely violate self-dealing rules and lead to various sanctions, including potentially prison. IKEA isn't a US charity, so none of the rules we're discussing apply.

jakamau 8y ago

There's soft power gained by effective and selective charitable giving. Donating to specific major charities and organizations that operate at a metropolitan level can provide access and influence with other organizations and donors that can't be bought by any other avenue. Dollars and cents, you're absolutely right. But at a certain point, money isn't that valuable to the wealthy.

Ntrails 8y ago

> The only reason to give to charity is to benefit that charity. It also denies money from the government financed programs which you may not agree with, whilst allowing you to get your name on a building. The choice of how to distribute your tax outgoings is a simply a terrible idea.

usaar333 8y ago

> But no matter what, if they just sold the damn asset and kept the money, they would have more money at the end of the day than they would having gone through this rigmarole. Yes, that's true, but that ignores the personal benefits derived from giving to charity. (In theory, "personal benefit" portion can't be deducted - in reality, it can be). For instance, in the highest tax bracket in CA, donating $0 basis stock could result in your taxes being reduced by ~80% of the fair market value; i.e. you can donate $X by only paying 20% of X. As long as you derive more than 20% personal benefit from the charitable gift (and that's a low enough threshold it isn't that noticeable), giving to charity might beat selling that stock.

URSpider94 8y ago
The highest tax bracket in CA is nowhere near 80%. More like 50% (40% federal + 10% state). And appreciated stock held long-term is taxed at the Federal cap gains rate of 20%, so the max is closer to 30%.
- usaar333 8y ago
  Highest bracket for ordinary investment income is 54.1%. 37% federal income, 13.3% state, 3.8% federal net investment. California uses same tax rate for long term cap gains. So highest long term rate is 37% (20% federal, 13.3% California, 3.8% net investment). If you sell and keep proceeds of $0 basis stock, you get $0.63 per $1. If you donate $1 of said stock, you get up to a $0.54 tax deduction. In this extreme example, there's only a 16% gain by selling vs donating.

maeln 8y ago

In some country, there is a cap where if you have more than X wealth/income, it will bump your tax rates by several percent. It use to be the case in France. With those kind of "for the super rich" taxes, it can be (depending on the implementation) more interesting to give enough of your wealth to charity to be under the cap.

solatic 8y ago

> There is no way to give money to charity in such a way that you end up with more money than if you had not given to charity You note that the particulars of valuations can allow people to claim a larger deduction than if they sold the asset and donated the proceeds. But that's precisely the point. If you have a $10 million tax bill, and you're looking to keep as much of that $10 million as possible, then donating an asset to charity with an optimistic valuation puts more money in your pocket compared to selling it for actual market value (especially since you would pay further taxes on the sale). The fact that you never see any of the money, because you took it as a deduction instead of a check, is irrelevant. At the end of the day, after your tax bill is settled, you have more money in the bank compared to selling, and that's all that matters.

gammateam 8y ago

> But they are ALWAYS better off (in terms of money received in their bank account) by NOT GIVING TO CHARITY. There is no way to give money to charity in such a way that you end up with more money than if you had not given to charity. No not necessarily, the charity's purpose itself can be to perpetuate and buoy a particular asset. It can be to develop the market for the asset. Lets say you own a housing community and benefit from the demand and price of that housing community. You can donate cash you have, borrowed cash, an underdeveloped property, a whole house, or even shares of the housing community project. In all of these circumstances you get a tax deduction, and yes that is moved off of your balance sheet. The charity could be formed for the purpose of building out the housing community and now it is funded and can do whatever necessary to make your housing community attractive, raising the value of all the rest of your assets. The charity isn't trying to make money (as revenues) so its doesn't encroach on commercial purposes. As the charity spends it gets no tax deductions aside from its exemption to taxes in general. But your benefit is still long term capital gains. Therefore when you are an individual, the benefit isn't that clear because couldn't you just get the deductions from your own expensable efforts? Typically you wouldn't be the only entity donating to this charity. Other people in your industry would be using it for the same purpose, letting it be an autonomous entity fulfilling its narrow purpose. So then the benefit becomes more clear.

dragonwriter 8y ago

> Yes, donors get a deduction for charitable giving. But they are ALWAYS better off (in terms of money received in their bank account) by NOT GIVING TO CHARITY. If that was actually true, giving to charity would be an aberration; in fact, giving to charity is done because it is seen to be advancing the giver’s interests, meaning they are, from an experienced utility standpoint (the only meaningful one), better off, not worse.