Maximizing the tax benefit from charitable gifting
Advisor’s client wished to gift $6.0MM of his Aperio portfolio to charity. Aperio selected the optimal securities, and also helped the advisor avoid paying $1.0MM in unnecessary taxes.
Advisor’s client wished to gift $6.0MM from his existing Aperio portfolio to charity. Advisor asked Aperio to find the most appreciated securities to donate. Since the client was retired, the client’s accountant was concerned that the lack of income meant no tax write-off for the charitable contribution. Accountant recommended to the advisor that Aperio sell additional securities and recognize $6MM in gains to create income against which to deduct the donation.
Aperio selected the optimal securities to donate, but helped the advisor recognize that the tax economics did not support recognizing the additional gains. Aperio selected securities in the portfolio that had high embedded gains but that would not significantly impact portfolio tracking error. Aperio also analyzed the tax economics for the advisor of recognizing the additional $6.0MM in gains. The approach would have cost an incremental $1.0MM in taxes.
Aperio helped the advisor persuade the client to carry forward the charitable deductions to offset future income or gains.
The advisor and client executed the gift but not the incremental asset sales, avoiding over $1.0MM in unnecessary taxes.