Time is running out to make tax-deductible contributions in 2024. Review our year-end contribution guidelines.
How donating a portion of your private equity interests before a liquidity event can mean a greater gift to charity
Do you own private equity interests in a portfolio company nearing a liquidity event or a fund currently winding down? Increase your impact by donating a portion of your interests directly to charity, you may potentially increase your tax efficiency and the size of your charitable gift.
Potentially eliminate capital gains taxes and the Medicare surtax, which combined could be up to 23.8%.
Take an immediate income tax deduction in the amount of the full fair-market value* if you itemize your deductions.
Maximize support to your favorite charities.
*For contributions of complex or non-publicly traded assets, generally fair market value is determined by a qualified appraiser, in compliance with the IRS.
When you donate your interests directly to charity, the receiving organization gains 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:
Value of portfolio company stocks: $5,000,0001
Federal long-term capital gains rate: 23.8%2
Capital gains and Medicare surtax paid on $5,000,000 (23.8%)
-$1,190,000
$0
Total contribution to charity
(after deducting federal taxes)
$3,810,000
$1,190,000
Additional amount dedicated to charity
+$1,190,000
Use this calculator when considering donating your private equity interests, or consult a professional advisor.
As a managing director at a private equity (PE) firm and the general partner (GP) for several PE funds, Ellen is in the perfect position to make a difference to the communities she cares about.
Ellen’s firm is preparing to exit ABC company, which she owns shares in. She wants to donate her shares in ABC company before it is sold. She calls Fidelity Charitable well in advance of the sale to arrange the donation. Her contribution of non-publicly traded assets offers two significant tax efficiencies. First, her gift is magnified by minimized capital gains taxes. Instead of giving $3.8 million, she’s able to contribute $5 million, all because she chose to donate pre-sale shares. She will also be entitled to a fair market value tax deduction on the shares3.
Working with Fidelity Charitable allowed her to support a free after-school program, in addition to a brand-new community center. This one simple change will affect the lives of families for years to come.
3Fair market value of the appreciated securities as determined by a qualified appraisal, held more than one year.
Start making a difference today by opening a Giving Account—no minimum required.
Fidelity Charitable accepts a wide variety of privately held assets that fall under the umbrella term of “private equity interests,” including LP or LLC interests in a private equity fund, LLC interests in a co-investment vehicle, carried interest (in certain circumstances), and equity in an underlying portfolio company (typically a C-Corp).
Fidelity Charitable encourages donors to engage in a conversation with our Fidelity Charitable planning experts and the donor’s own tax and legal advisors as soon as they become aware of a potential liquidity event. It is never too early to have the conversation, but it may be too late. Potential liquidity events can include an exit from the sale of an underlying portfolio company or investment and the dissolution of a late-stage private equity fund.
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.
For contributions of pass-through interests (such as LLC or LP interests), Fidelity Charitable (as a member or limited partner) may be subject to unrelated business income tax (UBIT) on any income it derives during its period of ownership and on its gain from the sale. As discussed more fully in the Complex Asset Contribution Form, UBIT Questionnaire and Fidelity Charitable Program Guidelines, any/all UBIT will be deducted from the applicable Giving Account.
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
