Do you own an interest in a privately held LLC or limited partnership that may have a future liquidity event? Donate your business interests directly to charity and potentially increase your tax efficiency and the size of your charitable gift.
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 business interests directly 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:
Amount of LLC business interests owned: $5,000,000
Federal long-term capital gains rate: 23.8%1
Value of LLC business interests donated: $1,000,0002
Capital gains and Medicare surtax paid on $1,000,000 (23.8%)
-$238,000
$0
Total contribution to charity
(after deducting federal taxes)
$762,000
$1,000,000
Additional amount dedicated to charity
+$238,000
Use this calculator when considering donating your LLC business interests, or consult a professional advisor.
The value of Scarlett's LLC has increased significantly since her initial investment several years ago.
As an executive and owner of significant interests at a privately held LLC, which was likely to be sold in a few months. Scarlett wondered if a portion could be used to provide meaningful support for her alma mater.
She spoke with her certified public accountant, who suggested that it may be possible to make a charitable contribution of the LLC interests. Together they discussed the contribution with Fidelity Charitable and, upon close review of the facts and circumstances, determined she could contribute the LLC interests to Fidelity Charitable because a sale was not yet certain to happen. A few months after Scarlett's contribution, a buyer was identified and Fidelity Charitable participated in the sale of the LLC. Fidelity Charitable used the sale proceeds to fund Scarlett's Giving Account, and she recommended a grant to her business school. Because the capital gains tax did not apply to Fidelity Charitable's sale of its interest in the LLC, Scarlett was able to make an additional grant recommendation to another charitable organization, one that provides college scholarships to foster kids.
Start making a difference today by opening a Giving Account—no minimum required.
Fidelity Charitable will generally look to accept a minority interest in an LLC or LP.
Most donations occur post-letter of intent, pre-binding purchase and sale agreement. However, Fidelity Charitable encourages donors to engage in a conversation with our Fidelity Charitable Planning Experts as soon as they decide to sell their business. It is never too early to have the conversation, but it can be too late.
No. 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. Fidelity Charitable can make an introduction to a local valuation firm if needed.
It is important to consider whether the contribution prior to the sale would result in an “anticipatory assignment of income.” Generally, if a contribution is made after all the material terms of the sale are agreed upon and there is no material risk that the sale will not close, the IRS may conclude on audit that the contribution is an “anticipatory assignment of income.” If the IRS determines that the sale was pre-arranged, the IRS could require payment of any capital gains tax that otherwise would have been due upon the sale of those shares (plus possible penalties and interest). Whether a contribution will be considered an “anticipatory assignment of income” is dependent on the facts and circumstances.
Fidelity Charitable 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.
Fidelity Charitable accepts a wide range of financial assets, from cash and checks to stocks and even non-publicly traded assets.
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
