Question: My sister is struggling with this question. When giving the required minimum distribution (RMD) from an individual retirement account (IRA) to a qualified charity, which method of giving (hypothetically and in general) results in the best tax savings for the donor/owner of the IRA?

1.) Giving a security (with a low basis and high market value) directly to a charity, or

2.) Selling the same security while it is still in the donor's IRA account and then transferring by check from the IRA to the charity the cash rather than the security.

Answer: When giving to charity there are basically two types of accounts for tax purposes, says David Reinders, CFP.

The first, he says, is an account that has after-tax money where tax is paid on the gain. "In this type of account giving highly appreciated stock makes a lot of sense because you are giving away all the gain to the charity and do not have to pay tax on it," says Reinders.

The second type of account has pre-tax money, which is what an IRA account is. "When money is withdrawn from any type of retirement account, the distribution is taxed as ordinary income," he says. "Therefore, it makes no difference if you are giving a security with a low basis or cash because it is still taxed as ordinary income when you withdraw it.

"Therefore, I would look to either give cash or money market funds if you have it in the account or liquidate the investments that are least favorable to you going forward," says Reinders. "Or, if they are all equally performing, you may choose to proportionally sell a little or all of the investments to create the amount of cash that you need. However, if you are giving your required minimum distribution, then it would probably be a smaller amount and may be more appropriate to give cash or liquidate an investment or two to create the amount necessary."

One more thought. Depending on your sister's age, a qualified charitable distribution might be called for? Generally, a qualified charitable distribution is an otherwise taxable distribution from an IRA (other than an ongoing SEP or SIMPLE IRA) owned by an individual who is age 70½ or over that is paid directly from the IRA to a qualified charity. Read Retirement Plans FAQs regarding IRAs Distributions Withdrawals.