Vanguard, Fidelity name the smarter alternative to selling stock

Vanguard, Fidelity name the smarter alternative to selling stock

Damilola Esebame

Sun, September 13, 2026 at 9:47 PM GMT+3 5 min read

Tech and AI stocks may have doubled recently, but selling those shares means handing the IRS a cut of every dollar gained. That capital gains bill keeps many investors locked into concentrated positions with elevated single-company risk.

Vanguard's charitable giving guidance lays out the appreciated-securities donation route: transfer shares directly into a donor-advised fund (DAF), deduct the fair market value, and skip the capital gains tax.

Fidelity Charitable's guidance extends the play. Repurchasing the same shares with cash rebuilds the position at a higher cost basis, adds a charitable deduction to the return, and shrinks the future tax hit.

The mechanics are procedural, but year-end transfer deadlines and IRS documentation rules create timing traps that can delay the entire benefit.

How donating stock to a donor-advised fund erases the capital gains bill

Federal tax law allows the transfer of long-term appreciated securities directly to a qualified charity or donor-advised fund without paying capital gains tax on the appreciation.

For stock held longer than one year, the deduction equals fair market value on the transfer date, not the purchase price, Vanguard confirmed.

Fidelity's Viewpoints charitable-giving guide illustrates the savings with a scenario showing how much the tax difference can reach for investors holding appreciated positions.

An investor who bought $20,000 of stock 20 years ago now holds shares worth $50,000, with $30,000 in embedded long-term gains.

Selling and donating the cash would cost about $7,140 in combined federal capital gains tax and Medicare surtax on that $30,000 appreciation, Fidelity calculated. Donating the stock directly eliminates that entire bill.

How the donate-and-repurchase play works for concentrated stock positions

Vanguard's guidance covers the general mechanics of donating appreciated stock, but it does not address the rebalancing problem facing investors overweight in AI names.

The donate-and-repurchase play lets holders target specific tax lots, particularly the lowest-basis shares, for donation. This generates the largest deduction per share while clearing the deepest embedded gains from the position.

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Executing that requires the specific identification cost basis method on the transfer instruction to the brokerage, Fidelity charitable's guidance noted.

The default first-in, first-out treatment would surrender lots in the purchase order, leaving the largest embedded gains behind.

An investor who bought Nvidia across 2020, 2022, and 2024 can direct only the 2020 lots into the DAF, donating the shares with the deepest appreciation.

They can then repurchase the same number of shares at the current price, keeping the position steady while establishing a cleaner basis.

The wash-sale rule doesn't apply to the donate-and-repurchase play

A frequent question about the donate-and-repurchase play is whether buying back the same stock would trigger a wash-sale violation.

That rule bars taxpayers from deducting losses on a security sold and repurchased within 30 days before or after the sale, but it applies only to losses, Fidelity Viewpoints stated.

Because the shares were donated rather than sold at a loss, buying back the identical stock is fully permitted, Fidelity's framework confirmed.

The repurchase resets the cost basis to whatever was paid for the shares, so any future sale starts from the new, higher entry point.

An investor holding $100,000 in shares with a $20,000 basis who donates and repurchases replaces $80,000 in embedded gains with a fresh $100,000 basis.

None of that math counts until the shares settle at the charity, and the settlement date is what the IRS reads.

Brokerage transfer deadlines that could push the deduction into 2026

The deduction counts in the tax year when the shares reach the charity or fund. In-kind stock transfers between brokerages typically take five to ten business days from initiation to settlement, and late December holiday closures compress that window further.

Justin Miller, Partner and National Director of Wealth Planning at Evercore Wealth Management, told the American Institute of CPAs National Tax Conference that donors trying to use appreciated stock in the final weeks of the year are almost always too late.

You can't do this at the end of the year, especially if we're using appreciated stock, let alone trying to create a donor advised fund. Getting the stock and transferring accounts does take time

Publicly traded securities are exempt from the qualified appraisal requirement at any donation value under IRC §170(f)(11)(A)(ii)(I), removing that trap for stock donors.

If a transfer initiated in late December 2026 settles on January 2, 2027, the deduction moves to tax year 2027, with no mechanism to assign it retroactively.

Fidelity Charitable maps the year-end tax sequence for concentrated AI-stock donors

Fidelity Charitable's donor guidance frames the year-end play for concentrated AI-stockholders.

Pick the shares with the lowest purchase price, transfer them to a donor-advised fund, claim a deduction for what they're worth today, and use cash to buy the same number of shares back at the current price.

Publicly traded securities require no qualified appraisal, and the wash-sale rule does not apply because the shares were gifted. The deduction is capped at 30% of adjusted gross income (AGI) under IRC §170(b) and is carried forward for 5 years under IRC §170(d).

Starting January 1, 2026, the One Big Beautiful Bill Act has imposed a 0.5% AGI floor on itemized xharitable deductions. Only contributions above that count, and married joint filers must clear a $32,200 standard deduction to itemize.

Donors can group two or three years of planned giving into a single large DAF contribution, which clears both thresholds in the year they donate.

Related: Congress moves to unlock 401(k) charitable donations

This story was originally published by TheStreet on Sep 13, 2026, where it first appeared in the Investing section. Add TheStreet as a Preferred Source by clicking here.