BUSINESSWEEK ONLINE : NOVEMBER 13, 2000 ISSUE
BUSINESSWEEK INVESTOR -- THE BARKER PORTFOLIO 'Tis Better to Give--Really With donor-advised funds, you can avoid capital gains, get a huge income-tax break, and support your favorite cause Bragging is never attractive, I know. Yet I can't resist telling you about my best portfolio move this year. In July, I gave shares in a mutual fund that was laden with such stocks as Intel ( INTC) and Cisco Systems ( CSCO) to a donor-advised charitable fund. Not only have I escaped the 18% slide that the fund has since suffered, but I also stand to save $6,500 on my next tax bill. If you haven't heard of donor-advised funds, get ready. Eaton Vance ( EV) opened one in June. T. Rowe Price ( TROW) started one in October. Others, such as Oppenheimer Funds and $75 billion SEI Investments, which caters to institutions and the rich, are set to follow soon. They're all popularizing a venerable, tax-smart way to make charitable donations. They're happy to accept donations of stock, bonds, mutual-fund shares, and other financial assets that have gone up in value. Some will even take such illiquid stuff as restricted stock or interests in private placements. Once they get control of the donated asset, they usually cash out. Donors can pick how the proceeds are reinvested, plus advise when and to whom charitable grants will be made. In other words, donors give up actual claim to the money but can suggest which qualified charities get it, when, and whether by name or anonymously. Better yet, by giving appreciated assets, donors enjoy a twin tax break. Suppose you bought 500 shares of a stock at $10 and now it's at $40. If you've held it more than a year, you're sitting on a potential capital-gains tax bill of $3,000. By donating the shares, you erase the capital-gains tax and also get to deduct their full $20,000 value on Form 1040. If you're in the 36% bracket, your tax bill would fall by $7,200. As with all things tax-related, there are exceptions. For one, deductions on donations of appreciated assets are limited to 30% of adjusted gross income in any given year--though the excess can be carried forward over five years. And the deduction is limited to what you donate to the fund, not what's given to charities later. GIFT OF GAINS. Beyond tax breaks, what I find truly cool about these funds is how they offer a relatively painless way to rebalance a portfolio. I didn't donate fund shares because my heart suddenly grew soft. Instead, my stomach grew weak at the prospect that my big gains on the fund would evaporate in a bear market for growth stocks. I badly wanted to grab the gains, yet couldn't stand sharing 20% with Uncle Sam. So I went shopping for a donor-advised fund. Some are sponsored by local groups, such as the 85-year-old California Community Foundation, which serves my hometown, Los Angeles. Newer choices, such as Charles Schwab's ( SCH) Fund for Charitable Giving and Vanguard Charitable Endowment Program, looked better to me. In the end, I picked Fidelity Investments' Charitable Gift Fund. Its fees are on the high side, but it permits unlimited grants in sums as low as $250. That suits my decidedly five-figure account. Fidelity's Web site really shines. From my computer, I can see all account activity, past and pending. I can ask that a grant be made to a charity and, if I want to make a further grant to that group, I can click on ''regrant'' and zip past the details. If I want to donate assets held in a regular Fidelity account, I can do that in a few clicks, too. The one grant I've asked for so far came through swiftly and flawlessly. What could go wrong? If you give fund shares held by another institution, the transfer can drag on for weeks. Also, you can't ask funds to fulfill pledges you've already made to, say, your alma mater. And if one day you want your money back, forget it. Donations to the fund are irrevocable. Will I suffer donor's remorse? Perhaps. But I'm betting that a ready reserve devoted to charity will soften one hard heart. Questions? Comments? Send an e-mail to barkerportfolio@businessweek.com or fax (321) 728-1711 By ROBERT BARKER _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ BACK TO TOP					RELATED ITEMS 'Tis Better to Give--Really TABLE: Smart Charity: More and More Choices INTERACT E-Mail to Business Week Online

Copyright 2000-2008, by The McGraw-Hill Companies Inc. All rights reserved. Terms of Use   Privacy Notice