Issue 28: 2014

In Brief

Year-End Tax Planning

A heads-up about two issues.

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When it comes to year-end tax planning and charitable giving, individuals know the basics, but they can sometimes get tripped up in the details. Mitchell A. Drossman, national director of wealth planning strategies at U.S. Trust, offers a few tips here.

Corporate inversions have been big news this year. (That is, when a U.S. company arranges to be acquired by a foreign company.) But the tax implications for individual shareholders are rarely mentioned.

“With these deals, U.S. shareholders typically have their U.S. shares exchanged for shares of the acquiring foreign company. The problem is that the conversion often is regarded as a taxable event, even though the shareholders have sold nothing and received no cash,” Drossman says.“There is a possible opportunity here, however. If you were planning to give to charity anyway, using shares (owned at least one year) prior to the close of the inversion transaction would allow you to avoid realizing the potential gain. If you have a lot of gain, you may even decide to accelerate your giving and give what you would have given this year and next.” But, he cautions, you need to act quickly, before the transaction becomes inevitable. “Basically, the quicker you transfer the shares the better.”

All gifts don’t receive the same tax deductions. When it comes to charitable giving, gifts of appreciated stock are a great choice from a tax standpoint, but many investments do not fall neatly into the category of “publicly traded stock” and might not qualify for the favorable rules for charitable income tax deductions. Drossman provides some tips on gift types:

  • Bonds. The interest component might not qualify for a charitable deduction.
  • Leveraged property. These gifts raise complicated tax issues that may result in the recognition of income as well as a charitable deduction.
  • Master limited partnerships. While considered a publicly traded security, a gift of an MLP unit (actually an interest in a partnership) does not usually result in a tax deduction at its fair market value.

In sum, says Drossman:“When it comes to corporate inversions and the charitable income tax deductions to particular types of investments, consult with your tax advisor — earlier rather than later.”


Investing involves risk. There is always the potential of losing money when you invest in securities.

Any information presented about tax considerations affecting client financial transactions or arrangements is not intended as tax advice and should not be relied upon for the purpose of avoiding any tax penalties. Neither U.S. Trust and its representatives nor its advisors provide tax, accounting or legal advice. Clients should review any planned financial transactions or arrangements that may have tax, accounting or legal implications with their personal professional advisors.

Always consult with your independent attorney, tax advisor, investment manager and insurance agent for final recommendations and before changing or implementing any financial, tax or estate planning strategy.


Equity securities are subject to stock market fluctuations that occur in response to economic and business developments.

Fixed Income
Investing in fixed-income securities may involve certain risks, including the credit quality of individual issuers, possible prepayments, market or economic developments, and yields and share price fluctuations due to changes in interest rates. When interest rates go up, bond prices generally drop, and vice versa.

International Investing
International investing involves special risks, including foreign taxation, currency risks, risks associated with possible differences in financial standards, and other risks associated with future political and economic developments. Investing in emerging markets may involve greater risks than investing in more developed countries. In addition, concentration of investments in a single region may result in greater volatility.