Gifts of Appreciated Business Interests

Mike and Sue Smith

Donors and Professional Advisors Are Utilizing CICF’s Expertise

Recent research by Fidelity Charitable found that while 80 percent of charitable high net worth donors surveyed owned appreciated assets, only 20 percent had ever contributed appreciated assets instead of cash to charity. Fidelity was surprised to “uncover this awareness gap” regarding the tax-smart benefits of donating appreciated assets to charity, and CICF was, too.

A great opportunity exists for you to add value by helping to educate your clients about the tax smart benefits of charitable giving. Beyond gifts of appreciated, publicly traded stock, one strategy on the rise at CICF is the donation of privately held business interests, including gifts of interests in closely held C corporations, S corporations, partnerships and limited liability companies. Charitable gifts of closely held business interests provide two key tax benefits:

1. A charitable income tax deduction for the full fair market value of the donated assets; and
2. Avoidance of the capital gains tax that would have been paid had the assets been sold.

Donor Experience:

Over the last several months, local business man and philanthropist, Mike Smith, donated his interests in two different closely held businesses to the donor advised fund he and his wife, Sue, had established at Legacy Fund, an affiliate of CICF serving Hamilton County.

“Being able to utilize our donor advised fund to accept these two different privately held business interests was enormously helpful. CICF and Legacy Fund have the infrastructure and sophistication to be able to act quickly. CICF was an integral part of the team of advisors that made things happen on schedule, which was key to my being able to make the charitable gifts and expanding our family’s gift capacity,” said Mr. Smith.

Professional Advisor Experience:

Brett Headley, Vice President at J.P. Morgan Private Bank, assembled the team necessary to accomplish a top client’s charitable transfer.  Mr. Headley worked closely with the staff at CICF.  According to Mr. Headley, “These transactions aren’t simple like gifting publicly traded stock, and J.P. Morgan partnered with CICF and the client’s advisors to accomplish our shared client’s goals.”

Important Reminders:

There are complex requirements at play for gifts of non-publicly traded business interests, and timing can be a critical factor. It is crucial that the business owner donate his or her interests before there is a signed agreement with a prospective buyer. Donors must also follow IRS rules regarding appraisal requirements in order to substantiate the tax deduction. In short, your client will need a charitable partner that has the know-how to handle complicated charitable gifts.

CICF’s mission is to inspire, support and practice philanthropy, leadership and service in our community. If you or your clients have questions about charitable gifts of business interests or any other aspect of charitable giving, please feel free to contact Mary Stanley, Director of Gift Planning and Legal Affairs, at marys@cicf.org or 317.634.2423 x 319 or Sarah Weaver, Senior Gift Planning Advisor, at sarahw@cicf.org or 317.634.2423 x 510.