For an individual holding illiquid securities – often highly appreciated, with a low-cost basis, and a significant current fair market value – a transfer to a public charity is an opportunity to receive an immediate income tax deduction while supporting charity. By gifting business interests to charity a donor can reduce or eliminate capital gains tax, creating more charitable dollars following the redemption of the interest and a greater ability to accomplish his charitable intentions than if he sold the interests and donated the cash proceeds.
The availability and the amount of the income tax deduction depend in part on the type of property being transferred, the tax basis of the property, and the nature of the donee. The timing of the donation, the structure of the transaction, and the documentation of the transfer require planning well in advance of the gift.
Practitioners working with philanthropically inclined individuals who own interests in closely held businesses should consider the tax advantages associated with a transfer of such interests to a public charity (including a donor advised fund). This book gives a broad overview of the issues involved when an individual wants to make a charitable gift to a public charity with illiquid business interests.
- Deductible Charitable Contribution for Gift to Public Charity
- Charitable Gifts of Interests in Pass-Through Entities
- Charitable Gifts of S Corporation Stock
- Charitable Gifts of C Corporation Stock
- Deductible Charitable Contributions to Private Foundations and Charitable Trusts