The United States has a strange (legal) tax loophole where you can double-count capital gains when donating securities (with some restrictions): If you buy a stock, the values goes up, and you've held it for at least a year, you can donate it and claim a tax deduction on the current market value instead of the value of what you paid for it (the cost basis), and you don't pay taxes on the gains.

To see why this is a loophole, take a year where you make $100,000 in income and bought a stock for $15,000 last year and donated it this year (after holding it for at least a year).

• If the stock's price didn't change, the market value of the stock is $15,000 and you reduce your taxable income to $85,000
• If the stock doubles in price, the market value is now $30,000 and you reduce your taxable income to $70,000^[1]

Notice that you're donating exactly the same thing: You paid $15,000 on Jan 1st and everything that happened after that is irrelevant to you (except for the warm-fuzzies I guess).

If you could find two perfectly anti-correlated securities, you could exploit this more:

1. Buy $7,500 of security A and $7,500 of security B
2. Wait a year
3. Sell whichever security went down and donate the proceeds, along with the security that went up
4. Deduct the charitable donations (at least $15,000)
5. Deduct the loss on the security that went down

As an extreme case, if you found one security that doubles and one that goes to $0, you would have $15,000 in charity donations plus $7,500 in losses.^[2]

Anyway, I'm wondering why people don't exploit this? Tax avoidance is as legal as shooting an apple pie as long as you follow the letter of the law^[3] so I feel like I must be missing something.

I imagine "find two perfectly anti-correlated security with huge variance" is hard, but they don't have to be perfect for this strategy to be worth it. It seems like if you can find a charity that will accept options (like this one), you could do a long straddle and donate the in-the-money side, although this would be complicated and I think only 60% of the gains could be double-counted^[4]. Needing to hold whatever securities for a year is also annoying, but that's not a particularly long amount of time in the grand scheme of things.

Is there something I'm missing about this?

Note: Please don't blindly take this question as an argument that you should do this. If you actually plan to do this, you should really talk to someone who knows what they're doing first, and make sure the charity you plan to donate to will accept whatever security you want to give them. Tax avoidance is legal, but you there is a rulebook and you really must follow the proper rituals precisely.