Leave a Legacy by Gifting Private Stock
Business owners can create significant value by focusing on charitable giving prior to a company sale. Even after years of doing all the right things—including taking a proactive approach to ownership, aligning performance incentives, and being thoughtful about M&A—an exit with a poorly executed charitable giving strategy can turn a maximum tax benefit into a mediocre one.
Did you know that Mark Zuckerberg, Jack Dorsey, and many other successful entrepreneurs opened Donor Advised Funds at their local community foundations when they sold their companies? At the Community Foundation of Utah, Donor Advised Funds can be funded with gifts of private stock (C-Corp, S-Corp, or LLC), real estate, or other complex assets in addition to cash, allowing you to give in the ways that work best for you.
Example: See the Benefits
A donor owns C-Corp shares valued at $2,500,000. They want to donate a portion of their shares ($500,000) to charitable causes (schools, churches, nonprofits).
They have two options:
OPTION A
They sell $500,000 worth of shares and donate the proceeds to their favorite charitable causes.
Long-term capital gains tax paid¹: $119,000
Amount given to charity: $500,000
Total Expense: $619,000
OPTION B
Before the company is sold, they donate $500,000 of stock to the charity through CFU.
Long-term capital gains tax paid: $0
Amount given to charity: $500,0002
Total Expense: $500,0003
Estimates of tax savings are examples only. Actual tax benefits will depend on an individual donor’s overall tax situation. CFU offers no tax advice but encourages that you consult your tax advisers.¹Federal long-term capital gains tax rate: 23.8% ²This assumes there is no ordinary income attributed to the stock sale and no Unrelated Business Income Tax. S-Corp stock holders can reduce UBIT taxes by donating shares through CFU’s trust entity. ³This assumes there is no ordinary income attributed to the stock sale and no Unrelated Business Income Tax. S-Corp stock holders can reduce UBIT taxes by donating shares through CFU’s trust entity.
The information on this website is not intended as legal or tax advice. For such advice, please consult an attorney or tax advisor.