"I don't know how to tell you this, brother. But your engine is completely toast!"
That was the cheery diagnosis I received from my new out-of-town mechanic. This, after my 18-year-old son broke down on his way to my brother's wedding this weekend.
WARNING: Don't File Social Security Benefits Until You See This
I'm thankful everyone is now safe and we all made it to the wedding on time. But for the next little while, the Scheidt family is going to be one car short.
However, this bad news for our family is actually going to turn out to be great news for a deserving charity. Because instead of trying to sell an older-model non-functioning Jeep on the web, I'm planning to donate the car so at least it will do some good.
Incidentally as I've been doing some research on where to donate the car, I was reminded of a lucrative tax trick that I think you'll find very intriguing.
Frankly, I can't believe I haven't mentioned this to you yet!
The IRS Doesn't Want You to Know About This Trick
It's been a good year for us here at The Daily Edge. We've covered a lot of winning opportunities in the market this year. And with stocks hitting new highs, you should have quite a few winners in your account right now.
And it's also the time of year when many of us are particularly aware of those who are less fortunate than us. While I think it is important to be generous with time and money all year round, there's something about the holiday season that brings out more generosity in all of us.
If you're like me, you may be considering selling some of your winning stock positions and donating at least a portion of your profits to a deserving charity.
Don’t do it!!
Please don't get the wrong impression. I definitely want all of us to be generous this holiday season. In fact, I'm going to challenge you today to find a special cause that is close to your heart to donate your time or money to.
But if you sell shares of a winning stock and give the proceeds to a charity, you'll actually be forfeiting part of your profits to the IRS. That's because you'll have to pay taxes on any gains you have when you sell your shares.
The IRS doesn't want you to know it, but you can completely avoid paying taxes on your stock gains by making one small change to your charitable gift.
I learned this trick as a hedge fund manager when one of my clients decided to make a generous donation. By using this special tax loophole, my client was able to be more generous with his donation, keep more money in his own account, and bypass the IRS altogether.
This is the same strategy that Bill and Melinda Gates used to donate $4.6 billion worth of shares to their charity back in August.
Donating Shares Saves Taxes And Leaves You More To Give
When you sell shares of a profitable stock, you naturally have to pay taxes on your gains. After paying capital gains taxes, there's less money left over to pay to your charity.
But if you donate your shares of stock instead, you'll be able to completely avoid capital gains tax!
Here’s how it works...
Most legitimate charitable organizations have special brokerage accounts set up to be able to receive stock donations. You can simply instruct your brokerage to transfer a certain number of shares to your particular charity.
When the transfer is made, you can record the stock price on the day of transfer. This price (times the number of shares that you donate) allows you to calculate the value of your charitable donation.
If the charity is a legitimate 501(c)3 organization, you’ll still be able to write off the value of your donation. This will reduce your own tax bill and leave you with more money for expenses or to give away. At the same time, your charity will be able to sell the shares of your stock and keep the full value of the shares (without paying taxes).
So if you have it in your heart to be generous this holiday season, the gift of stock shares will actually allow you to be more generous, while paying less in taxes.
One quick thing to keep in mind is that charitable donations may not be tax deductible under the new Republican tax bill. So it would make sense to be as generous as possible this year (while you can still deduct your contributions).
This article originally appeared on The Daily Reckoning.