Avoiding Capital Gains Taxes

Avoiding capital gains taxes used to be so much easier. There are still a few methods for avoiding the taxes, including:

• Donate your appreciated stock. You get a deduction for the fair market value without having to declare the appreciation as a taxable capital gain.
• Transfer your appreciated stock to a relative in a lower tax bracket so that the gain is taxed at a lower rate, if anything at all.
• Hang on to your appreciated stock until your death. Unless you die in 2010, your beneficiaries will get a step up in basis.
• Buy a put on the appreciated stock.
• Sell a call on the appreciated stock.
• Do both: sell a call and buy a put, but at different exercise prices.

For more details, see William Baldwin, Six Ways to Avoid Capital Gains Tax, Forbes, July 30, 2010.