Gifts of Closely Held Stock: Getting Started

Closely held stock is shares in a C Corporation, of which the majority of stock is held by a few shareholders. A gift of closely held stock can be a powerful way to contribute to our future.

Question MarkDid you know?
Retained earnings can be taxed twice, once on the corporate level and, if distributed as dividends, again on the individual level.

How It Works
You decide to give some of your shares of closely held stock to us (not so much as to reduce your ownership to 50 percent or less). Because there is no market to resell these shares, we may present the stock to your corporation for redemption, which could be paid for with your company's retained earnings. This gift provides us with much-needed funds once we can liquidate your stock and gives you an income tax deduction in an amount equal to the fair market value of your stock.

Are there any problems with this plan? The Internal Revenue Service has ruled that you cannot legally bind a charitable organization to go through the redemption at the time it receives the shares. There can be no prearranged contract or agreement for the corporation to buy the stock. But the IRS accepts a tax court holding that a charitable organization may independently offer the donated stock for redemption.


Gifts of Closely Held Stock
You
You
1
You give stock to Children's Hospital of Wisconsin Foundation.
2
You receive an income tax deduction.
Children's Hospital of Wisconsin Foundation
3
Company may repurchase stock from Children's Hospital of Wisconsin Foundation.
4
Cash is given to Children's Hospital of Wisconsin Foundation.
How You Benefit
  • Neither you nor Children's Hospital of Wisconsin Foundation will owe capital gains taxes on the shares you donate to charity.
  • You qualify for an income tax deduction for the full appraised value of the stock.
  • You maintain control of the corporation.
Please contact Kelly Sachse at (414) 266-6121 or (888) 543-7233 or ksachse@chw.org if we can answer any questions you have about this tax-smart way to give to Children's Hospital of Wisconsin Foundation.




       


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The information on this website is not intended as legal or tax advice. For legal or tax advice, please consult an attorney. Figures cited in examples are for hypothetical purposes only and are subject to change. References to estate and income taxes apply to federal taxes only. State income/estate taxes or state law may impact your results.