Meet the Street: Year-End Tax Tips

With a new year just around the corner, it's important to make sure all your deductions and contributions are squared away so they can count toward April's tax return.

Here to remind us of some of the moves you should consider making is Robert Lawrence, a tax and estate lawyer with New York law firm Cadwalader, Wickersham & Taft, one of the oldest law firms in the country. Lawrence is the chairman of the private-client department at Cadwalader, advising high net-worth individuals and families.

Robert C. Lawrence, Partner, Cadwalader, Wickersham & Taft

Recent Meet the Streets

Prudential Securities' James Lucier

Scudder Emerging Markets Income Fund's Jan Faller

Ernst & Young's Desmond Wong

Advantus Mortgage Securities' Kent Weber

TeenAnalyst.com's Chris Stallman

TSC: What are some tax moves people should think about before the end of the year?

Lawrence: Make your annual exclusion gifts before the year's end. You can give up to $10,000 each year free of gift tax to any number of individuals. If you are married, you can give up to $20,000. But be sure that the check cashes before the end of the year.

In addition to the annual exclusion, you can give up to $675,000 away over a lifetime without any gift-tax consequences. This amount will increase in 2002. If you are married, take advantage of your spouse's unified credit. And be sure to select assets that will appreciate in value, such as marketable securities, real estate, stock options or privately held stock. Any appreciation in the value of the property given away will reward your beneficiaries without any further gift tax.

TSC: How much of a benefit do taxpayers get from making charitable donations?

Lawrence: If cash is donated, a charitable deduction is allowed for the full cash value. If appreciated marketable securities are donated, the charitable deduction is equal to the full fair market value of the securities if the taxpayer has held the stock for more than one year.

However, the charitable deduction for cash gifts is limited to 50% of adjusted gross income [AGI] for gifts to public charities, and 30% of AGI if the recipient is a private foundation.

In the case of gifts of appreciated marketable securities, the limitation is generally 30% of AGI for gifts to public charities and 20% of AGI for gifts to private foundations. A donor may carry over any excess deductions for up to five years.

TSC: How can people motivate themselves to get into the charitable frame of mind? ...