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December 2, 2023

The rally in U.S. stocks continued for a fifth week.  The S&P 500 Index rose 0.8% for the trading week at the close on Friday, December 1, 2023.  The benchmark rose above the previous peak set in the summer and is now at its highest level since March 2022.

The S&P’s nearly 12% rebound off its late-October low has been both rapid and dramatic.  Given the unusually speedy turnaround, it’s unsurprising that risk-managed portfolios have had a tough time keeping up with unmanaged market indexes.  

At times like this, it may appear that there’s little to be gained by managing risk.  But the true test can only be judged over longer periods, across business cycles, and on that front the historical results for risk-managed investing remain encouraging.

The holiday season has arrived, and for many investors that means it’s time to plan for upcoming charitable donations.  While the joy of giving is its own reward, charitable donations can also provide donors with considerable tax benefits.  With that in mind, here are three easy ways to implement tax-wise charitable contributions.

 Donate Appreciated Securities.  

When you donate appreciated stock to a charity, you can claim a charitable deduction in an amount equal to the fair market value of the shares given at the time of the gift, but do not have to include the unrealized gain in income.  The charity can then sell the securities without having to pay taxes on the built-in gain.

 Use Qualified Charitable Distributions to Fund Gifts.

A qualified charitable distribution, or QCD, enables donors who are at least 70.5 years of age to transfer up to $100,000 from an IRA or qualified retirement account to the charity or charities of their choice without the need to include the distribution in income.  In addition, the donation serves to reduce the donor’s minimum required distribution in the year of the gift.

 You can't make a QCD directly from your 401(k), but you can roll over your funds to an IRA and then make a donation.  Charities are also great retirement plan beneficiaries when the account owner dies because the amount that passes to the charity when the account owner dies is not subject to income or estate taxes.

 Consider Gifting to a Donor-Advised Fund.

A donor-advised fund, or DAF, is a public charity to which an individual can make a tax-deductible donation while retaining an advisory role over how to invest the assets and how much to contribute to various charities over time.  A DAF allows donors to make contributions and then take their time to decide which nonprofits to support.

 While charitable donations can result in significant tax savings, there are limits on the extent to which a charitable gift can be deducted in a single year.  Therefore, it’s very important that you discuss your giving plans with your tax advisor before proceeding.

 That’s all for now.  Have a great weekend and invest wisely my friends.