Gifts of Closely Held Stock

One Way to Invest In Your Community. 

Have you considered what a gift of closely held stock would do for your community and for you? Mississippi’s business owners invest a great deal in the establishment and building of a successful business, and financial resources are only part of the story. In many respects, the building of a family business is the epitome of the American dream – created with equal parts of opportunity, blood, sweat and tears.  When it is time to transfer ownership – whether to create income for retirement or to pass on an inheritance – business owners have special opportunities to give something back to their hometown.

Personal Deduction with Your Corporate Dollars
This is a dynamic opportunity for you to help your community with a gift of your corporation’s stock. Transferring shares of your corporation’s stock to the PineBelt Community Foundation for the benefit of your community can provide the following benefits:

  • Provides the satisfaction of making a gift today that can be invested in your hometown.
  • Creates an immediate personal charitable income tax deduction.
  • Bypasses capital gains taxes on the gift of stock.
  • Avoids declaration and double-taxation of dividends.
  • Allows the corporation to buy back the stock.
  • Reduces estate taxes and settlement costs.

 

How This Plan Works
A business owner who owns the majority of the stock in a family business or corporation wants to help build his hometown’s endowment fund with a gift of stock from his corporation. The owner transfers shares of his stock to the PineBelt Community Foundation valued at $100,000. As a result of this gift, the business owner becomes entitled to a $100,000 charitable deduction on his personal tax return. Plus, he avoids the capital gains tax on the appreciation of the corporation’s stock.

The PineBelt Community Foundation sells the stock for $100,000 cash.  The gift of stock leaves the business owner in full control of the corporation and without any personal costs. Finally, the $100,000 cash is placed into a community endowment fund that will assist worthwhile projects into the future.  Also, closely-held stocks can be given to the PineBelt Foundation with a so-called “put and call” where the corporation and/or the remaining stockholders have the obligation to purchase the stock, perhaps over time, from the Foundation. 

Key Issues with This Gift

  • If the gift value exceeds $10,000 the charitable gift deduction amount must be determined by a qualified appraisal of the stock.
  • There can be no prearranged obligation for the PineBelt Community Foundation to sell the stock back to the corporation.
  • Corporate repurchase should occur two weeks to two months after the gift is made.
  • Corporation’s liquidity is needed to repurchase the stock.
    • Gift the stock to a Charitable Remainder Trust to receive a lifetime income.
    • Make a gift of stock prior to selling the company to receive a personal tax deduction and avoid capital gains taxes.
    • Use a combination of the above variations to transfer your corporation to your heirs.

 

Variations of This Plan

  • Gift the stock to a Charitable Remainder Trust to receive a lifetime income.
  • Make a gift of stock prior to selling the company to receive a personal tax deduction and avoid capital gains taxes.
  • Use a combination of the above variations to transfer your corporation to your heirs.

Please click here for a brochure on Gifts of Closely Held Stock

 

For more information please contact your Professional Advisor or Theresa Erickson, Executive Director at contact@PineBeltFoundation.org or call 601.583.6180