Under a 40% top federal marginal capital gains rate and 40% top federal income tax rate with 13% top state rates for each, a taxpayer in the top marginal bracket *gains post-tax money* by donating unrealized capital gains to charity instead of realizing the gain: pic.twitter.com/KkabmRU4N1
— Andrew Granato (@agranato42) April 22, 2021
Obviously there may be caps on such deductions, as discussed in the chain of tweets, and furthermore, if I understand this correctly it is normalizing the basis at zero. So you don’t have to take this entirely literally, but nonetheless it is an interesting comparison to consider — the return to selling shares just might not be that high, especially if you can get some non-tax benefits from the donation.
So if you compare the decision to buy equities to a real estate investment, which is probably not going to lose its more favorable capital gains treatment…