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Tax Benefits of Alternative Investments in Donor Advised Funds

Natalie Leniski avatar
Written by Natalie Leniski
Updated over 6 months ago

  1. What are the tax benefits of alternative investments in a DAF?

    • Transferring alternative investments (e.g., hedge funds, private equity, venture capital) to a DAF before liquidation can provide deductions against capital gains.

    • Donating cash proceeds after liquidation to a DAF allows deductions against adjusted gross income (AGI).

  2. How can advisors help clients maximize tax advantages in a DAF?

    • Encourage transferring investments from taxable portfolios to a DAF before liquidation to maximize potential tax benefits.

    • Leverage deductions available for capital gains and AGI effectively.

  3. What are the common pitfalls to avoid when managing alternative investments in a DAF?

    • Failing to obtain proper appraisals for donated assets.

    • Ignoring compliance procedures, which could increase risk and reduce tax benefits.

  4. Why is transferring investments before liquidation advantageous?

    • It often results in higher deductions compared to post-liquidation transfers.

    • Reduces exposure to capital gains taxes.

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