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Opinions on options for DAF

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  • Opinions on options for DAF

    Interested in thoughts regarding a donation to our DAF this year. We have been bundling a few years worth of donations every few years to get the tax benefits of getting over the personal exemptions and it is time to do it for 2021. We need to make the donation this year to "refill" our DAF and we plan to put in a low 6 figure amount but have the following things to consider.

    Amount to donate will be low 6 figure for 2021

    I have some low cost mutual funds with a low cost basis which have had the gains going back from several years. However, we would otherwise not be thinking about selling these for many years, or maybe ever as we could leave those for our children when they would get a step up on the basis one day.

    I am retired but my wife is still working part time so we will not be in the lower capital gains bracket for a few more years.

    We do not buy many individual stocks but we did take a pretty big position in an airline stock at the low point of the pandemic. We could transfer some of this holding to the DAF to satisfy what we need. Unfortunately the stock dipped just before I held it for one year and I continued to hold it and it has now taken another dip of course.

    The low cost mutual fund I would use is about 2x of the basis.

    The airline stock is about 1.8x of the basis.

    While it makes sense to donate the mutual fund, I do not want to hold the single stock for long term. However, I think it is likely that it will rebound again although there is obviously no way of knowing that for sure. If it does not do so in a couple of weeks, that might mean holding it into 2022.


    Should I hold the airline stock if I am thinking it will rebound but that might mean holding it into next year. If I do that, I would need to donate the mutual fund.

    Should I donate the mutual fund since it has a slightly higher gain and hold onto the stock until next year.

    I have a fairly large long term tax harvesting amount that will just about cancel the capital gains on the sale of the airline stock if I did wait until next year but should I use that now or just donate the airline stock and hold onto that loss for future use?

    Thanks for any thoughts.

  • #2
    Donate either and buy back with cash. Equivalent to resetting the tax basis.

    I don't buy individual stocks so I know which I'd donate.


    • #3
      I always donate whatever has the highest percentage gain. In your case, it's the mutual fund.

      As FIREshrink points out, you can always buy more, and later on, you could sell the airline stock if it rebounds to buy more of the mutual fund.


      • #4
        If you want to dump the airline stock I would just do it.


        • #5
          Considering the shaky ground of Roth conversions, this could be a great year to do a significant Roth conversion and offset with a DAF contribution.
          • Can donate up to 30% of MAGI in appreciated investment property, extra carries over for up to 5 years
          • Can donate up to 100% of MAGI in cash under CARES Act, same c/o
          Those who d/n/h appreciated investment property but are “cash heavy” and considering investing it can achieve the same long-term impact by contributing cash to the DAF and investing for growth within the account, fyi.
          My passion is protecting clients and others from predatory and ignorant advisors 270-247-6087 for CPA clients (we are Flat Fee for both CPA & Fee-Only Financial Planning)
          Johanna Fox, CPA, CFP is affiliated with Wrenne Financial for financial planning clients