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Buy back stock after giving it charity

by on
in Small Business Tax,Small Business Tax Deduction Strategies

Q. I gave away appreciated stock to charity to avoid tax on the gain. But now I want to buy the same stock again. Does this violate the wash-sale rule? A.M.A., Lynbrook, N.Y.

A. No. The wash-sale rule only prohibits you from deducting a loss on the sale of a security if you acquire the same or “substantially identical” security within 30 days. Actually, you’ve hit upon a pretty clever idea. By donating stock that has appreciated in value, you can claim a tax deduction based on the current value without ever paying any tax on the appreciation. Tip: When you buy the stock again—at a presumably higher price—your taxable gain will be lower than it would have been had you not donated it, because your basis will reflect the purchase price of the second block of stock.

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