Dear Mr. Gisriel:
I have been very fortunate the past few years with my investments, including those in real estate. Since it is the end of the tax year, are there any tax-saving strategies that you recommend?
Name withheld by request
Baltimore Dear investor:
Following are a few strategies you might consider:
Give away your big gainers. If you are planning a sizable charitable donation, your best bet is to make a gift of appreciated assets -- including real estate investments.
You can avoid the capital gains tax, while securing an income tax deduction for the full fair market value of your donation. The charity may sell real estate or securities without tax, and so enjoys the full benefit of your contribution. It's a win-win situation, for both you and the charity.
Eliminate some estate tax. You are entitled to give away $10,000 each year to as many individuals as you like, without any gift tax. This includes $10,000 worth of real estate. (Tax lawyers call it the "annual gift tax exclusion.")
For an individual with a potential million-dollar estate and substantial estate tax exposure, avoiding tax on just $10,000 may not seem like much savings, but it can add up over the years.
For example, a grandparent who gave $10,000 to each of two children, each child's spouse and each of six grandchildren every year for 10 years would transfer $1 million tax-free.
Gift tax exclusions can't be saved up -- it's a case of use it or lose it, every year.
You should consult an accountant or tax planner before you proceed.
Pub Date: 12/15/96