Conversation tips for Advisors: Planning a business exit

What strategies can lessen my tax burden when I sell my business?

There is a growing trend of contributing privately held business interests to public charities. Your clients can optimize their giving by leveraging the value of these non-publicly traded assets, which provides immediate and ongoing support to multiple charities on their own timetable. By contributing such assets to charity, clients:

• Will potentially minimize capital gains tax exposure on the sale of the asset.
• Are generally entitled to a tax deduction of the current full market value* (not just the original cost basis, as is the case for a contribution of a non-publicly traded asset to a private foundation).
• Can make the most of their donation. By making a contribution in this tax-efficient manner, the highest possible percentage of the funds from the sale is available for grant recommendations.

Conversation Tips

Tip #1

Start the conversation as early as possible when considering charitable donations of business interests. For business owners nearing a transition point, timing is critical because of all the considerations involved. People often wait too late in the process prior to selling their business to realize their full potential benefits.

Tip #2

Let clients know that some of the charities they want to support do not have the resources to accept or liquidate these types of closely held business interests, so a donor-advised fund may be a better solution.

Tip #3

Review with your clients how contributions are processed to make the highest possible percentage of the funds from the sale available for them to make grant recommendations.

Tip #4

Help your clients understand what resources are available. At Fidelity Charitable, we have 30 years of experience navigating the specific requirements and avoiding potential pitfalls related to the contribution of these assets, including back-office support to help eliminate the administrative burden.

*As determined with a qualified, independent appraisal.