Shares of stock as QCD, do I just do the math?

[Just-Lisa-Now-]

TP transferred shares of stock to her church from her RMD. 

Wells Fargo sent letters showing the number of shares and the price per share on the date they were transferred...I just do the math for this as the QCD amount, right?

[qbteachmt]

Wow; is this what happened:

There is no reason to send the shares as QCD, because the growth would not have been taxable to your client as gain, and there is no tax reason to do this as shares. Instead, as RMD, the entire amount is taxable income, so she could have had the shares sold and just sent the proceeds of the RMD to the church.

There also isn't any math to do, because there is no process for excluded gain on something that was in a deferred account and would be treated as income, not gain. You are not handling an Appreciated Asset.

You send shares when you want to shelter yourself from the Gain on appreciated stock price.

[JeremyNJ]

Yes, you do the math, shares times current share price.  You do not need to worry about the basis or anything.  The value of the shares was included in the 1099-R so you need to adjust the taxable amount for the QCD. While it might have been easier to sell the shares in the IRA and just distribute cash, there could have been a situation where in kind distribution made sense.  Maybe it was a thinly traded stock and a sale could have moved the market.

[Just-Lisa-Now-]

She called me about this back last May ...asking if I could find basis for a couple of stocks she bought a long time ago, she had the month and year so I found the basis for her, she was worried about the gains ...then she told me it was in her IRA so I told her the gains wouldnt matter since it was in the IRA, she said she wanted to donate them to the church and I told her to just sell them and give the church the money, but then she brings me this.

So she doesn't get the QCD deduction, it would need to go on Sch A?  or does she get nothing out of this?

[Just-Lisa-Now-]

I like this answer! Im feeling like it conflicts with the info above though.....so now Im really confused.

[qbteachmt]

She gets QCD for the value as RMD; she lost any real Tax benefit.

This is why holding Stocks in an IRA isn't really the best strategy. You just turned gain into Income.

[IRonMaN]

Time to talk to the investment person that handled the fiasco.  If they put the value on the 1099R, they would have had to come up with some value to do so.  Also, she should have completed some paper work to do a QCD.  See if she or the investment guru has any paperwork.

[qbteachmt]

Oh, Sorry; it's not even "just gain." In most cases, the stock was purchased in the IRA, so the entire Sale is income and basis doesn't matter to the stock purchase or sale or transfer. That's my point.

[JeremyNJ · Accepted solution]

Your are thinking about this way too much.  It doesn't matter what is distributed from the IRA, cash or assets, the value of it is what is income, and that same value is what counts as a QCD if it goes to charity.  The brokerage firm gave you the description of what was distributed and that is what they used to calculate the income.   Use that as the QCD amount.  

[JeremyNJ]

So regardless of someone's financial picture they should never own equities or other assets that may appreciate greatly in their tax deferred accounts?  I think that is an awful blanket statement to make.  Many investors have the bulk of their financial assets in deferred accounts, so according to your logic, they would be super heavy on fixed income regardless of their risk tolerance.  There are other reasons as well why your logic is not good.  You need to think about this stuff in other than straight tax ways.

[TaxGuyBill]

I can't find any restriction why it would not be allowed.   So I would do the math and take the QCD deduction.

[qbteachmt]

"There are other reasons as well why your logic is not good. You need to think about this stuff in other than straight tax ways."

If you truly are a diversified investor, you try to manage appropriate holdings and activities in the account(s) that have beneficial treatment for that type of activity. It's interesting to see the reaction from someone who is so proud of appreciated stock value (well, until a few weeks ago...) in their IRA, and their own investment accounts are not as aggressive, because they thought only the Gain on Sale would be taxed from the IRA

And there is no real Math to do for this event; it's just a Value for the property given. Basis, gain, etc, is moot.

[BobKamman]

I think it was the client who was thinking way too much.  Outside the IRA, a gift of appreciated stock is better than selling and then giving cash.  From the IRA, just sell the stock and give cash -- don't put the burden of making the sale, on the church.  

[JeremyNJ]

"If you truly are a diversified investor, you try to manage appropriate holdings and activities in the account(s) that have beneficial treatment for that type of activity."

Maybe, but maybe most of their assets are in tax sheltered account so that account needs to be diversified.  Or maybe they want to retire early and have a shorter time horizon for the assets outside of the IRA.  There are lots of maybes which is why it is silly to make a blanket statement of how you should invest in an IRA.

"It's interesting to see the reaction from someone who is so proud of appreciated stock value (well, until a few weeks ago...) in their IRA, and their own investment accounts are not as aggressive, because they thought only the Gain on Sale would be taxed from the IRA"

I'm not even sure what you are saying here.  I doubt know that most people think only the gains on their IRA would be taxed.  And if some of my accounts were to decrease in value dramatically, I would probably prefer it to be the account that I don't plan on drawing from anytime soon.

"And there is no real Math to do for this event; it's just a Value for the property given. Basis, gain, etc, is moot."

Exactly, which is what your initial answer should have been, but instead you chose to not answer the question and leave several comments just confusing the original poster.

[qbteachmt]

@JeremyNJ 

No, I'm not talking about your accounts. I don't even know you or your accounts. I was using the word "you" in reference to the generic "other person." And excuse me for typing my response to @Just-Lisa-Now- while also thinking through what she described as I drafted my response. I think out loud, in my office, too.

I kneel before your guidance, chastised by my style of interaction with others, as a volunteer and peer participant here, for the most part. For the other part, I am simply tolerated, and I have always appreciated that toleration. I even provide good input now and then. Sorry you don't find that valuable.