Message Font: Serif | Sans-Serif
 
No. of Recommendations: 0
I have charity commitments and usually I fulfill it with well appreciated stock held for long term. But I also have some stock of a publicly traded limited partnership, which is a tax shelter. They pay a nice distribution, which is 80% non taxable at the time of distribution. But at the time of sale it is subject to recapture, and at the ordinary income tax rate. So my question is this : If I donate stock to my charity, what happens with recapture? How much grieg this will cause to my charity ( even if it is advantageous to give them the stock, I can not allow them to spend most of it on the accountant to fill out most of the million forms I fill out every year for this K-1 substitute, plus more because of their tax status).
Print the post Back To Top
No. of Recommendations: 0
[[I have charity commitments and usually I fulfill it with well appreciated stock held
for long term. But I also have some stock of a publicly traded limited
partnership, which is a tax shelter. They pay a nice distribution, which is 80%
non taxable at the time of distribution. But at the time of sale it is subject to
recapture, and at the ordinary income tax rate. So my question is this : If I
donate stock to my charity, what happens with recapture?]]

The problem is that what you originally PAID for the publicly traded partnership (PTP) may not be the same as you BASIS in the partnership. In addition, attempting to get a FMV on the partnership might pose a problem.

It also depends upon what kind of "recapture" you are talking about. If you have taken losses in prior years, you basis in the interest may be much less than you think. Remember that PTPs are generally NOT considered "qualified appreciated stock" when dealing with charitable contributions where you can get the full FMV of the shares as your charitable contribution. So you may be stuck with your BASIS in the PTS, which could be very low.

So before you go too far on this one, you'll want to make sure that you do your homework.

[[ How much grieg this
will cause to my charity ( even if it is advantageous to give them the stock, I can
not allow them to spend most of it on the accountant to fill out most of the million
forms I fill out every year for this K-1 substitute, plus more because of their tax
status).]]

Right...it may be a PITA for the charity...not necessarily because of the forms but because of the future transfer issues. The the problems with this issue really fall more on your than the charity.

TMF Taxes
Roy
Print the post Back To Top
No. of Recommendations: 0
Roy,

thanks for your answer on PTP. But it was the first time I did not understand what you've said. The recapture I mentioned will result from depreciation of assets deduction, which made reportable taxable income much less than actual distribution. It is a very nice tax shield (for people who could be interested, symbol is SPH, and their investor relations site explains the way it works), but I'm tired of filling out their tax forms every year, and because it is considered a tax shelter, I was not allowed to file electronically! That is when I decided to get rid of the stock, and am trying to find best disposition.
Print the post Back To Top
No. of Recommendations: 0
[[thanks for your answer on PTP. But it was the first time I did not understand
what you've said. The recapture I mentioned will result from depreciation of
assets deduction, which made reportable taxable income much less than actual
distribution.]]

Right...at the partnership level...which was passed through to you. BUT...YOUR basis in the partnership is much different (at least potentially) than depreciation capture issues. Just because YOU sell (or donate) your interest in the stock, there are not necessarily any "recapture" issues for you to deal with at the personal level. That is why PTPs are much different than regular stocks...and require additional knowledge on how partnership taxation actually works...especially at the partner level.

That's really the best that I can explain it. IRS Publication 541 will explain it in more detail (and with many more words), so I would suggest that you take the time to read it. You may well find it confusing, but it's really the best information that you can get regarding partnership issues.

Sorry for the limited response, but you'll need a much broader backround before we can really discuss specific (and more technical issues).

TMF Taxes
Roy
Print the post Back To Top