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Ask the expert: Tax planning

Featuring Karla D’Alleva Valas, J.D., LL.M., Head of Fundraising, Fidelity Charitable

Please note: This item is from our archives and was published in 2020. It is provided for historical reference. The content may be out of date and links may no longer function.

Karla D’Alleva Valas leads Fidelity Charitable’s adviser success strategy focused on CPAs who prioritize charitable planning as integral to their practice. Previously, she led the Complex Asset Group, a team of attorneys working with CPAs to facilitate charitable donations of appreciated private company stock and other nonpublic assets. She is admitted to the bar in New York and Massachusetts.
Karla D’Alleva Valas leads Fidelity Charitable’s adviser success strategy focused on CPAs who prioritize charitable planning as integral to their practice.
Fidelity Charitable
Fidelity Charitable, an independent public charity, has helped donors support more than 300,000 nonprofits with more than billion in grants. As the nation’s largest donor-advised fund program, our mission is to grow the American tradition of philanthropy by providing programs that make charitable giving accessible, simple, and effective.

Year-end giving strategies

Q When should I recommend a “bunching” strategy for charitable giving?

A If your client has the flexibility to accelerate their giving, they can combine, or “bunch,” multiple years of charitable giving into a single year to surpass the itemization threshold. In off-years, your client would take the standard deduction. Similar logic applies when your client has a high-income year. Making an oversized contribution in a year when there is a financial windfall enables your client to potentially mitigate the associated tax burden by benefiting from a larger charitable deduction in a year when their deduction limitation may be higher than normal.

Q What is the best asset to donate to charity?

A It is hard to beat the tax benefits of donating long-term appreciated securities. When long-term appreciated securities are donated directly to charity rather than sold, the charity generally does not pay capital gains tax on the sale. Your client becomes eligible for an immediate tax deduction for the full fair market value, up to 30% of their adjusted gross income. This strategy may allow your client to increase the overall amount available to charity, creating a win-win for your client.

Q What should I keep in mind if my client is planning a business exit?

A Timing is essential when donating privately held business interests. Prepare your client to donate early. Ensure company documentation is in order ahead of time. Don’t ignore the appraisal requirement. Consider each type of charitable vehicle carefully. Finally, leverage the expertise of other professionals familiar with the donation of business interests to make charitable donations successfully and efficiently during a business exit.

Q How can M&A activity drive smart charitable giving?

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A M&As are exciting, as they can create additional income, but they can also produce additional tax liabilities due to the forced recognition of capital gains. Charitable giving can potentially reduce your client’s tax liability while also enabling them to support a favorite charitable cause. If your client donates the stock in the time frame between when the deal is announced but before it has been completed, they may be eligible for a fair market value deduction and will generally not be subject to capital gains tax. If, however, they decide to donate after the deal is complete, they could still offset the tax consequences by making a charitable donation of cash by Dec. 31.

Karla D’Alleva Valas leads Fidelity Charitable’s adviser success strategy focused on CPAs who prioritize charitable planning as integral to their practice. Previously, she led the Complex Asset Group, a team of attorneys working with CPAs to facilitate charitable donations of appreciated private company stock and other nonpublic assets. She is admitted to the bar in New York and Massachusetts.