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DONATING SECURITIES TO CHARITY

An investor who donates securities to a charity will receive a tax deduction equal to the value of the securities. If the investor has an unrealized gain and has held the securities for more than 12 months, the investor will not owe any taxes on the appreciation. If the securities were held less than 12 months, the investor will be responsible for taxes on the appreciation. The recipient's cost base will be equal to the value of the securities on the day it received the gift.

TRUSTS

Trusts may be revocable or irrevocable. With a revocable trust, the individual who established the trust and contributes assets to the trust, known as the grantor or settlor, may, as the name suggests, revoke the trust and take the assets back. The income generated by a revocable trust is generally taxed as income to the grantor. If the trust is irrevocable, the grantor may not revoke the trust and take the assets back. With an irrevocable trust, the trust usually pays the taxes as its own entity or the beneficiaries of the trust are taxed on

the income they receive. If the trust is established as a simple trust all income generated by the trust must be distributed to the beneficiaries in the year the income is earned. If the trust is established as a complex trust the trust may retain some or all of the income earned and the trust will pay taxes on the income that is not distributed to the beneficiaries. The grantor of an irrevocable trust is generally not taxed on the income generated by the trust unless the assets in the trust are held for the benefit of the grantor, the grantor's spouse, or if the grantor has an interest in the income of the trust of greater than 5 percent. A trust may also be established to hold or to distribute assets after a person's death under the terms of their Will. Trusts that are established under the terms of a Will are known as Testamentary trusts. All assets placed into a Testamentary trust are subject to both estate taxes and probate.

 
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