Gifts of Business Interests
How It Works
- You give shares of closely-held stock to the Exeter
- Exeter may hold the shares and collect the dividends, or it may offer the stock back to your company for redemption or re-purchase. Exeter will apply dividends or the proceeds to the purposes you wish to support.
- You receive gift credit and an immediate income tax deduction for the appraised value of your shares, even if their original value was close to zero.
- You pay no capital gains tax on any appreciation that has taken place in the shares.
- Under certain conditions, you may be able to use closely-held shares to fund a life-income arrangement.
- You can make a significant gift that benefits both you and Exeter during your lifetime without using your cash reserves to do so.
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Please contact us so that we can assist you through every step of the process.
Questions and Answers
The governing documents (for example, Articles of Incorporation and Bylaws) of your closely-held company may include provisions dictating to whom you may transfer your shares. Often, but not always, charitable entities are permissible shareholders, but you want to be sure. In addition, other shareholders may be given a “right of first refusal,” which means that you won’t be able to give your shares to Exeter until all other shareholders have declined to purchase your shares. Be sure to review the governing documents for any requirements you need to meet before initiating the transfer.
Because we are a charitable entity, we must perform “due diligence” to ensure that accepting the shares won’t jeopardize our charitable status or expose Exeter to unexpected liability. We’ll need to review the company’s governing documents and talk with you and the company about any liabilities that may accrue, so please discuss your plans with us well in advance of the transfer.
Be careful. If you’re already far along the process of negotiating a sale of your shares, the IRS may view your contribution of the shares to us as a “step transaction” by treating your contribution as if you had already sold the shares and contributed cash to Exeter. If the IRS recharacterizes the transaction that way, you’ll have to pay capital gains tax on the transfer. You’ll still get a tax deduction for your contribution of cash, though, and Exeter will benefit greatly from your gift. Note also that Exeter cannot accept shares that it’s required to hold or sell.