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Question for the Money Doctors

Question submitted on Mar 6, 2014.

Question

I need to sell all my stocks/mutual funds to build a barn for unwanted horses on land I bought after my folks died. It's a lot, for me, and I'll face significant capital gains. Unfortunately, it's all due within the year. Any way to stagger cap gains, or ways to minimize the hit? If you need more info, please ask. Thanks for any ideas and your kind service!

Answer

Good job planning ahead for your tax liabilities, but not knowing all of your personal financial affairs, it is impractical to give you specific advice. Rather, let me pass along some planning thoughts and questions that I would consider, if I were you. You said that you need to sell all of your stock/mutual funds to build a barn. Can you afford to build the barn? How will building the barn impact your financial resources and retirement plans? Are there other like-minded people in your community who could help fund the barn? Have you looked into borrowing against the equity in your land to help finance the barn, versus selling all of your investments? Have you looked into taking a margin loan against a portion of your investments to help finance the barn? Would your caring/shelter activities for unwanted horses rise to the level of an entity that you could create that would qualify for tax exempt (non profit) status, i.e., charitable, educational, prevent cruelty to animals, etc.? If so, you could inquire about setting up a nonprofit organization and raise charitable funds from others who would be able to deduct their contributions to the new tax exempt organization to finance the barn. Did you inherit the stocks/mutual funds from your folks? If so, did you step up the cost basis for the inherited stocks/mutual funds to the value at the date of their deaths (which would impact your taxable capital gain)? As you can see, there are more questions than answers. You would be well served by contacting a CPA/PFS in your area to help walk you through your available options (visit www.findacpapfs.org). I hope that this helps and good luck with your plans.


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