Sue decides to establish a donor-advised fund account as a way to maximize charitable impact while potentially mitigating capital gains tax exposure. As there is no easily identifiable market for XYZ stock, Sue’s company has a buyback program in place for shares that are donated to charity. Sue, an executive at Corporation XYZ, plans to convert a portion of her concentrated XYZ holdings into cash to fund her philanthropic goals. Many donor-advised funds also have the resources and expertise for evaluating, receiving, processing, and liquidating this type of gift.Ĭase study: maximizing charitable impact while mitigating tax exposure The funds allow you to easily convert your appreciated interests into charitable contributions, in particular when a third-party sale or buyback program enables timely liquidation. Second, you may claim a fair market value charitable deduction for the tax year in which the gift is made and may choose to pass on that savings in the form of more giving.ĭonor-advised funds, which are 501(c)(3) public charities, provide an excellent option for donating privately held business interests. Donating a percentage of an interest held more than one year can unlock additional funds for charity in two ways.įirst, you potentially eliminate the capital gains tax you would incur if you sold the interest yourself and donated the proceeds, which may increase the amount available for charity by up to 20%. Your interest in a private business-such as a C- or S-Corporation, Limited Partnership (LP), or Limited Liability Company (LLC)-likely has a low cost basis and may have substantial appreciation, resulting in large capital gains taxes when sold.
If you are a charitably minded executive or entrepreneur, a donation of your privately held business interests may help you achieve maximum impact with your charitable giving.
#Donate to non profit how to#
How to increase donor impact and reduce taxable income.
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