Capital Gain Property Donated to "First category" qualified organizations

[msindc1]

Folks:

Client donated $100,000 in stock to his DAF.  A DAF is a "First Category" entity, so it is subject to the 60% limit.  But capital gain property has to be reported as noncash 30% limitation property.  Does the gift to the DAF go in Cash Contributions (for the 60%) or in Noncash Contributions under either 50% or 30%?

Micah

[Karl]

It would follow what was being donated (stock, capital gains property) before whom it was being donated to. So 30% limit it is.

[msindc1]

Thanks, Karl.

Can you confirm that I am right in my understanding that mutual funds are "noncash" property?

Micah

[Karl]

Correct, mutual funds are treated as noncash (even though the DAF can and often does immediately liquidate them into cash).

[BobKamman]

I'm seeing brokers push these DAFs, sometimes to clients for whom they make sense, in other cases when they don't.  I haven't figured out yet how they make money from them, but it's something to watch out for if you have generous clients who rely on salespeople with minimal tax training.  It can be a good way to unlock gains on highly-appreciated assets, but sometimes the long way around the barn.  

[Karl]

Brokers can get AUM on money in DAFs.

I'm personally a huge fan of DAFs (I'm not an advisor nor do I get any residual or benefit from clients using DAFs), with the caveat that donors don't save the DAF up up for "someday" giving. Currently we have billions "stuck" in DAFs. Taxpayers got the tax deduction, but a non-passthrough NFP has not gotten the money.

I personally use mine to bunch my charitable giving over multiple years. I donate a bunch of appreciated stock from my brokerage (yes, 30% AGI limit), replenish my brokerage with cash I would have donated directly, and then make monthly donations to my church and quarterly donations to my favorite charities out of my DAF.

My DAF gets to zero every two or three years. I itemize in the years I load up the DAF and enjoy the increasing std deduction in the other years (plus now giving for the new token charitable bump to the std deduction). I stack my property taxes to beef up my itemizing years also.

So I recommend them to my tax planning clients with the two caveats: 1) they understand they do not own the DAF money once deposited, and 2) they are okay with a "less personal" gifting method (some people really want to put a check in the church offering plate as part of their worship--a DAF wouldn't be worth it to them; I've become okay with just putting an empty giving envelope in for symbolism).