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Case Study
The following is an illustration of how this type of donation works.
Phil owns virtually all of the stock in a company he founded as a young entrepreneur. Its current valuation is $2 million. Phil's cost basis is zero because his original investment has long since been written off for tax purposes.
The corporation has $200,000 in retained earnings, and Phil is concerned that the IRS may question the retention of this amount and decide to impose a second tax on it. Moreover, he has wanted to make a major contribution to us. So, Phil gives us $200,000 worth of his stock, and both he and Long Beach Day Nursery accomplish their goals.
Phil's Tax Benefits
- Phil receives an income tax deduction of $200,000. He avoids federal taxes on the capital gain, plus possible taxes at the state level, too.
- His corporation solves its potential retained earnings problem, including a potential federal penalty tax on accumulated earnings.
- Phil retains full control of his company.
- Long Beach Day Nursery receives $200,000 once the stock is redeemed.
To learn more about supporting our organization today with a gift of closely held stock, contact Eileen Factor at 562-591-0509 or EFactor@lbdn.org.
Your Next Steps
Getting Started | Is This Gift Right for You? | Case Study | How to Complete Your Gift | Action Items
Getting Started | Is This Gift Right for You? | Case Study | How to Complete Your Gift | Action Items
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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.
