Gifts of Closely Held Stock
When it is time to transfer business 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.
Benefits of gifts of closely held stock
This is an opportunity for you to help your hometown with a gift of your corporation's stock. Transferring shares of your corporation's stock to the Nebraska Community Foundation for the benefit of an affiliated fund can provide the following benefits:
- The satisfaction of making a gift today that can be invested in your hometown
- 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 to make a gift of closely held stock
A business owner who owns the majority of the stock in a family business or corporation transfers shares of his or her stock to Nebraska Community Foundation. Nebraska Community Foundation sells the donated stock for fair market value. The gift of stock leaves the business owner in full control of the corporation and without any personal costs. As a result of this gift, the business owner becomes entitled to a charitable deduction for the full fair market value of the stock on his or her personal tax return. Plus, he or she avoids the capital gains tax on the appreciation of the corporation's stock.
- 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 Nebraska 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.
Variations of This Plan
- Gift the stock to a Charitable Remainder Annuity 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.