Gifts of business interests, like stock in a closely held corporation or shares in an investment partnership, can be beneficial for both you and The Nature Conservancy. Gifts are usually made outright, but in some cases may be used to fund a life-income arrangement such as a charitable remainder unitrust.
How It Works
- You give shares to TNC.
- The Conservancy receives income distributions, and may sell the shares to a third party.
- Receive a charitable income tax deduction for your gift, based on the full fair market of the shares, minus any debt or other related liabilities. (Note: There is no capital gains liability on the transfer to TNC.)
- May be able to use a business interest to create a life-income arrangement, such as a flip unitrust.
- Have the satisfaction of making a significant gift that benefits both you and TNC during your lifetime.
Can It Work For You?
A gift of business interest may work for you if:
- You are an entrepreneur, member of a family business, or an investor.
- You are able to transfer your interest to third parties like TNC.
- Your interest will continue to generate revenues that can flow to the Conservancy, or it is likely be redeemed or purchased in the near future.
- Your interest is not encumbered by debt, and TNC will not be called on to make future contributions to or for the enterprise.
Check whether there are any restrictions on the transferability of the shares, and that the shares have not been used to secure a loan from the corporation or partnership. If the loan is still outstanding, the IRS will consider the gift as debt relief and will impute taxable income on the loan.
- Make sure to secure an independent appraisal of the fair market value of the donation since shares in a closely held business or an investment partnership don't trade publicly.
- Check whether there are any restrictions on the transferability of the shares, and that the shares have not been used to secure a loan from the corporation or partnership. If the loan is still outstanding, the IRS will consider the gift as debt relief and will impute taxable income on the loan.
- Note that shares of an S-corporation are subject to additional IRS regulations.
- The Nature Conservancy must first review and approve any transfer with regard to issues of marketability, liability and involvement in business operations.
Meet Pam and Allen Rozelle
By using securities to set up a gift annuity, the Rozelles received a charitable income tax deduction—and nearly doubled their annual return.