- quote -

Next time, consider contributing the appreciated stock
(rather than selling the stock and contributing cash). That
way, you get the deduction but don't pay tax on the capital
gain.

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If this is a one-time gain you may be able recover some of
it with the 2006 tax return. Take a look at Form 8801 for
2006 and see if you trigger a credit. Of course that
assumes that congress doesn't change the rules.

BC

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In Jan 2005, I engaged in a detailed investment portfolio
rebalancing exercise.This has been well overdue. As a
result, I recorded long-term capital gains of ~$38000.

I work a W-2 job, so most of my income is from wages. (This
year is somewhat of an anomaly, with the large capital
gains...)

A quick estimation of total income & total tax versus
payroll withholding shows that I would have to write a check
to the IRS for $9900! Phew.

Most of that is attributable to the significant capital
gains, so I'm not complaining.However, I am trying to find
ways to lower my tax bill.

Here's what I've done so far:
1. Maxed out 401K contributions at work.
In addition, I utilize the medical/child-care flex-accounts.
2. In taxable investment accounts, 95% of dividend income is
tax-free.
3. Taking the full $4000 eligible IRA deduction for my spouse
4. Increased charitable contributions.

I ran the numbers on prepaying a portion of next year's
property taxes to the town (thus increasing the local taxes
deduction). Doesn't really do that much to help. I think I'm
getting well snagged by the AMT.

What else can I do to lower the tax bill? Suggestions
appreciated.

Thanks.

Simon.

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