Giving a Business to Charity: Stack the Odds in Your Favor
High profile giving associated with well-known businesses has maintained its place in the limelight, even amid recent market volatility and tenacious concerns about inflation and interest rates. Recent examples include last year’s gift of Patagonia by founder Yvon Chouinard; the well-reported generosity of philanthropists Melinda French Gates and MacKenzie Scott; and the portion of the proceeds, potentially worth $5 billion, from the eventual sale of Subway restaurants that are set to flow to a charitable foundation.
You can leverage potential future liquidity events to support the community causes that you care most about, and Greater Cincinnati Foundation (GCF) can help.
Advance planning is critical. These transactions carry with them layers of complexity, largely around the timing of the charitable gifts in relation to the sale transaction. The best outcomes are achieved through a thoughtful, multi-step process.
Two major considerations for gifting assets through the sale of your business:
- It will be necessary to secure a qualified appraisal of the business by a qualified appraiser when the business owner makes a gift of shares to comply with IRS requirements for documenting the value of the charitable deduction.
- Critically important to successfully executing this strategy is that the seller avoid signing any binding agreements for the sale of the business prior to making the gift to GCF.
You might even consider giving shares to a donor advised fund not all at once, but in increments over time during the business exit planning period (before a buyer is identified). This can help avoid the appearance that the gift is merely a function of the business sale and as such intended to be a tax dodge. If the IRS determines that the stock gifts to charity and the sale of the company are really one and the same event–a “step transaction”–the tax benefits of the charitable deduction could be disallowed.
GCF can be a valuable resource as you enter a pre-sale preparation process. This is especially true for a business that has operated for many years and has accumulated significant unrealized capital gains in its valuation – and likely to be heavily taxed at the time of the sale. GCF can work alongside you to maximize the resulting proceeds for charitable means.
Ready to chat? Contact Michele Carey CAP®, Director, Professional Advisor Relations, at email@example.com or 513-768-6171 to discuss how we can help you maximize your future ability to support the charities you love.