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One way donors can meet their philanthropic goals, while gaining some tax benefits, is through the gift of a business to a public charity.
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Every wealth planning discussion should include a conversation about philanthropy. Whether giving during one’s lifetime or legacy giving through one’s estate, identifying philanthropic goals and establishing a financial plan to support those goals can result in both charitable and financial planning benefits. Charitable giving can be as simple as writing a check or as complex as establishing a foundation with many other techniques along the spectrum that provide various income and estate tax benefits. One way donors can meet their philanthropic goals, while gaining some tax benefits, is through the gift of a business to a public charity.
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BENEFITS OF GIVING A BUSINESS INTEREST TO CHARITY
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A donor who gives a business interest to charity will be entitled to an individual income tax charitable deduction equal to the fair market value of the interest, subject to some important exceptions noted in Exhibit 1. For business owners who are considering selling their business, making a gift of a business interest to charity could result in significant tax savings.
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By making a charitable gift of a business interest, the donor will avoid the income tax, and, if applicable, the 3.8% surtax on net investment income, on the portion of the interest given to charity. However, depending on the type of business interest, the charitable recipient may be taxable on the business’ unrelated business taxable income from the ongoing business activities, as well as upon the charity’s disposition of the business interest.
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The income tax consequences of the gift of a business interest depends on the type of business interest being given to charity. Some businesses will result in unrelated business taxable income, which will result in such income becoming taxable to the charity.
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About BNY Mellon Wealth Management
For more than two centuries, BNY Mellon Wealth Management has helped families build, manage and preserve their wealth. Our specialized teams have the tools, knowledge and experience to develop comprehensive solutions for our business owner clients that address each client’s personal financial objectives and family dynamics, as well as issues specific to his or her business. For business owners considering a family office, our dedicated Family Office team brings more than 50 years of experience providing solutions and strategic insights to help family offices grow and preserve wealth across generations. For more information, visit www.bnymellonwealth.com or follow us on Twitter @BNYMellonWealth.
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Stay safe and healthy,
Pat Soldano
President
[email protected]
712 H Street NE Suite 1091
Washington DC 20002
(202) 681-8365
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We hope you’ve enjoyed this article. While you’re here, we have a small favor to ask…
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As we prepare for what promises to be a pivotal year for America, we’re asking you to consider becoming a supporter.
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The need for fact-based reporting of issues important to multi generational businesses and protecting a lifetime of savings has never been greater. Now more than ever, multi generational businesses and family businesses are under fire. That’s why Policy and Taxation Group is passionately working to increase the awareness of issues important to generationally-owned family businesses built on hard work, while continuing to strengthen our presence on Capitol Hill.
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About Policy and Taxation Group
Policy and Taxation Group is your voice in Washington on economic freedom. We advocate for policies that allow American families to fully enjoy the economic liberties and benefits of a robust free market unique to our nation. For over 25 years, we have been the loudest voice in the nation’s capital on eliminating the death tax. This ill-conceived tax has a destructive impact on families, family businesses, job creation, and the national economy.
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Have questions or would like more information about becoming a Supporter or donating? Please contact John Marino at [email protected].
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