Charitable Giving From a Business Sale

You may have a client ready to sell a business, which will create a large tax event. One effective way to avoid some of the tax liability is by donating a partial interest in the business to the Community Foundation.

Making a charitable gift, whether outright or to a charitable remainder trust prior to the sale of a business provides maximum tax advantages. By giving an ownership interest or equity, the donor may avoid capital gains tax on the portion of the business that is donated, as well as claim an income tax deduction based on the fair market value of the gift. The seller simply gives the interest in the business to a donor-advised fund or charitable remainder trust, and the buyer then makes the purchase from the charity, which is of course, tax-exempt. By contrast, when a gift is made from proceeds of the sale, the donor will have paid capital gains tax on 100% of the sale price, so the tax benefit comes solely from the income tax charitable deduction.

Amounts from the sale would then create an endowment fund to carry out your client's charitable wishes.

 

Additional Information

A knowledgeable member of the Community Foundation staff is available to discuss specific scenarios that you are handling for a client. We can provide you with materials or gift illustrations to supplement your own materials, and are also available to attend joint meetings with your clients if appropriate. Contact us by phone at (315) 422-9538 or fill out this form.

 

Learn More:

Talking to Your Clients About Giving
How We Can Help
Types of Funds
Why Partner With Us
Types of Assets
Legacy Planning
Administrative Fees
Request a Meeting