How to help: Hurricane Helene and Hurricane Milton guidance
Time is running out to make tax-deductible contributions in 2024. Review our year-end contribution guidelines.
How private C-Corp stockholders might be overlooking potential financial benefits.
Do you own privately held C-Corp stock in a company that may be sold? Before selling your stock in a private C-Corporation, consider donating a portion of your holdings directly to charity and potentially increase your tax efficiency and the size of your gift.
Potentially eliminate capital gains taxes and the Medicare surtax, which combined could be up to 23.8%1 on the contributed shares.
Claim an immediate income tax deduction in the amount of the full fair market value2 of the private company shares on the date of the contribution.
Maximize support to your favorite charities.
1 This assumes all realized gains are subject to the maximum federal long-term capital gains tax rate of 20% and the Medicare surtax of 3.8%. This does not take into account state or local taxes, if any.
2 This refers to the fair market value of the stock as determined by a qualified appraisal. Stock must be held for more than one year.
When you donate your privately held C-Corp stock to charity, the receiving organization gains the full proceeds from the sale, and you potentially eliminate capital gains exposure. This win-win could mean more money for the causes you care about. Consider this potential savings example:
C-Corp shares owned with zero cost basis valued at $2,000,0003
Federal long-term capital gains rate: 23.8%4
Value of shares donated: $400,0005
Long-term capital gains tax paid
-$95,200
$0
Valuation discount
8%
(due to minority and lack of control)6
Charitable contribution/charitable deduction
$304,800
$368,0007
Amount available for granting
$304,800
$400,0008
Additional amount dedicated to charity
+$95,200
Use this calculator when considering donating your privately held C-Corp stock, or consult a professional advisor.
Kathy, a successful entrepreneur, is thinking about selling her garden center business to pursue other ventures.
Her plan was to donate a portion of the proceeds to pay for preschool tuition for low-income children. A couple of firms have shown interest in buying Kathy’s privately held C-corp, but the terms are still being negotiated.
Kathy knows that because she built her business from basically nothing over the course of her career, she would face a large capital gains tax once the sale is complete.
Her financial advisor suggested that instead of selling the business and donating a portion of the proceeds, she should contribute a 20% minority stake in the business directly to Fidelity Charitable—helping to minimize her capital gains exposure and allowing her to claim a higher tax deduction. This strategy would also allow Kathy to make a larger donation than she could make if she only contributed the after-tax proceeds from the sale of her business.
Start making a difference today by opening a Giving Account—no minimum required.
Fidelity Charitable will generally look to limit its ownership to a minority interest in a C-Corp.
Timing is essential to donating private business interests. Fidelity Charitable encourages donors to engage in a conversation with a Fidelity Charitable planning expert and the donor’s own tax and legal advisors as soon as they start exploring a business sale or learns of a potential liquidity event. It is never too early to have the conversation, but it may be too late. (It’s important to start the conversation before a business sale progresses too far.)
Not necessarily. The IRS requires that donors receive an appraisal to determine the fair market value of the asset on the day it was received by the charity. There will likely be some discounts for lack of marketability and control.
No. Fidelity Charitable, as a shareholder, will not be subject to tax liability on any income derived during the charity’s period of ownership and on its gain from the sale.
Fidelity Charitable accepts a wide range of financial assets, from cash and checks to stocks and even non-publicly traded assets. See what you can donate.
Information provided is general and educational in nature. It is not intended to be, and should not be construed as, legal or tax advice. Fidelity Charitable does not provide legal or tax advice.
Ready to get started?
Opening a Giving Account is fast and easy, and there is no minimum initial contribution.
Or call us at 800-262-6039
