Is There a Right Time to Donate for Tax Purposes?

Question. Julian, hello from “Patrick.” That’s not really my Christian name, and I’d as soon skip my last name.

How come? Because, like lots of other accomplished authors, I’m bombarded with snarky emails from people who want to spell out why they resent writers.

Julian, what follows are disclosures that I hope won’t elicit unpleasant emails from resentful persons who envy writers and who ought to significantly increase their intakes of prune juice.

Along with lots of other authors, I live in Sellwood, a neighborhood of Portland, Oregon. Sellwood is where I wrote some best-sellers. They all go deep into the weeds on the major land, sea and air battles of the Second World War and notable events in the early years of the Cold War.

Julian, if I could replace this email with Zoom, you’d see no change in my nose size when I channel my inner Garrison Keillor* and, to lift one of his lines, tell you more than you ever wanted to know about my voluminous personal papers.

What are my cache’s contents? Treasure troves of original manuscripts for my books and articles, as well as lots of exchanges of correspondence with boldface names, such as cabinet members, dictators, diplomats, military commanders, prime ministers, presidents and an assortment of A-listers in locales like Hollywood, Silicon Valley and Wall Street.

Julian, let’s pivot from an incomplete listing of my accomplishments to what prompts my email. I want to explain two options for my personal papers.

First one: offer to sell them; lots of libraries and universities would want to buy them. My expectation is that the outfit that bids the most for them will deposit an amount noticeably north of one million dollars into my bank account.

Second option: donate them to my alma mater, Grand Old Ivey, a university that’s world renowned for its research library. My understanding of the deduction rules for donations, given that the winning offer for my papers is likely to top one million, is that the measure of my charitable write-off is at least that amount.

I thought to consult a tax expert on questions like these: Is there a tax-right way to time my donation? All in one year? If so, this year or the next one? Or donate in installments over several years?

Is there a tax-right way on when to receive a seven-figure-payment? Require the buyer to pay everything in one year? If so, this year or the next one?

Or require the buyer to send payments over several years? Julian, no need to remind me not to run afoul of the rules for constructive receipt

I know that I’ve not exhausted the possibilities, which is why I’ve scheduled a meeting with my tax adviser, Melania. She’s someone with decades of experience on how to take maximum advantage of often-overlooked opportunities buried in the Byzantine Internal Revenue Code, and, equally important, adept on how to sidestep pitfalls.

Julian, just like I invented a Christian name for me and skipped my last name, I believe it best to skip Melania’s last name. Assuming you’re disposed to reply, I would appreciate your thoughts on what questions to ask her.

Answer. Patrick, I’m definitely disposed and feel flattered. Who wouldn’t?

Your convivial email convinces me that I’m the person who should hear your confessions. Also, just like you want to be on a first-name basis with me, I want to be on the same basis with you.

Bro, now that we’re bosom buddies, let’s start with some low-hanging fruit. Don’t donate.

You misread the deduction rules for contributions; here’s what they actually say; the measure of your allowable deduction is your cost basis for the property. Because your basis is zero, the IRS prohibits any deduction.

What’s ahead, Dear Readers, in subsequent columns? I’ll elaborate on why Patrick should forget about a big-bucks donation and instead focus on what to discuss when he meets with Melania or other qualified tax pros, whether they’re accountants, attorneys, financial planners, or enrolled agents.

In particular, I’ll alert Patrick to a new proposal by a new president who wants to raise revenue and close the tax gap. Just what does Mr. Biden want? Return the top rate of 37 percent to the 39.6 percent that it was before Congress approved and then-president Donald John Trump signed the Tax Cuts and Job Act.

I’ll provide info about: the tax rates for Patrick and other filers who receive ordinary income; the seven graduated brackets for ordinary income that go as high as 37 percent for 2021; why he’ll get slapped with the top rate; and what it means when the brackets are indexed. 

*Garrison Keillor was the long-time host of National Public Radio’s A Prairie Home Companion, until NPR ousted him because several women alleged that he sexually harassed them.