THE GENEROUS BUSINESS: HOW FAMILIES ARE USING THEIR BUSINESS AS AN ENGINE FOR GENEROSITY
Charitable gifts of closely-held business interests have proliferated over the last two decades, enabling business owners to dramatically increase the amount and impact of their charitable giving, while meaningfully reducing ordinary income, capital gains, and estate taxes. There are two primary planning strategies that business owners employ to capture these enhanced charitable and tax benefits.
The first strategy, and the primary focus of this presentation, involves business owners giving interests in their business prior to an anticipated sale or liquidity event. This strategy allows the business owner to capture a charitable income tax deduction for the value of their business, saving income taxes at their highest marginal tax rate. In addition, upon sale of their business, they are able to avoid or dramatically reduce capital gain taxes on the gifted interest.
The second strategy involves businesses that are not anticipated to sell in the very near future, but nonetheless enable business owners to leverage their generosity by making charitable gifts of interests in their business with the charity holding such interests (generally non-voting interests) longer term. Such gifts are often made on an annual basis with the intent of maximizing the business owner's annual charitable deductions allowable under the tax code. This strategy allows business owners to capture an immediate charitable income tax deduction, reduce the effective tax rate on annual income allocated to the gifted interest, and avoid or dramatically reduce capital gain taxes upon the eventual sale or liquidation of the business.
These strategies enable business owners to exercise wise stewardship of what is typically their most valuable asset, and position them for a meaningful and fulfilling life after the sale of their business pursuing charitable endeavors. Their charitable gifts and subsequent proceeds from the sale of their business can serve as a springboard to serve others and enable business owners to continue to use their business skills, talents, and expertise in the philanthropic arena.
- How to leverage and enhance their charitable and tax goals and objectives through charitable gifts of interests in their business.
- The two primary strategies associated with business interest gifts - gifts prior to an anticipated sale or liquidity event, and gifts where charity may hold gifted business interests longer-term.
- The various legal and tax considerations associated with gifts of business interests, including a discussion and exploration of unrelated business taxable income, application of the charitable deduction rules for non-cash gifts to various charitable entities, and excess business holdings.
- The application of the strategies, structures, issues, and considerations of a charitable gift of a business interest through exploration of a giver "success story"/case study.
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Meet Michael King:
Michael serves as a charitable gift and estate-planning attorney with the National Christian Foundation (NCF). He works closely with generous families sharing concepts and strategies that allow them to leverage the impact of their giving by minimizing their income and estate tax liabilities.
In his role with NCF, Michael’s primary focus and expertise is facilitating charitable gifts of complex assets including closely held businesses, real estate, intellectual property, oil and gas interests, collectibles, precious metals, etc. He also helps families to plan their estates in a manner that dramatically increases their charitable giving, and in most cases avoids estate tax completely—regardless of the size of their estates.
Prior to joining NCF in 2006, Michael spent over ten years with an international tax and accounting firm, and a wealth management firm/multi-family office. In these roles, he counseled affluent families on a broad range of wealth management issues including both financial and non-financial aspects of wealth.