Case Studies

S Corporation Shares

The Challenge:

A business owner with charitable intentions is interested in selling appreciated shares of his S corporation.

After consulting his professional advisors, he learned that while charities are eligible shareholders of S corporation stock, very few have the expertise or willingness to accept the shares.

The donor knows that if he liquidates the stock himself and donates the proceeds, he will incur personal capital gains taxes and substantially reduce the amount available to charity.

The Solution:

By donating S corporation stock to a donor-advised fund at NPT CAT, the donor may avoid paying capital gains and will receive an immediate tax deduction on the full fair market value of the shares.

Because NPT CAT is a public charity in the trust form, it pays Unrelated Business Income Tax on the capital gains at a substantially lower effective rate (around 10%) than a public charity in the corporate form (up to 40%).  A gift of S corporation stock to NPT CAT means that the most amount of money is available for the donor to grant to his intended charitable recipients. In addition, NPT CAT handles all of the administration—from liquidating the S corporation shares to executing grants to qualified recommended charities—leaving the donor free to focus on what’s important: giving.

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