Charitable Giving

When you think about supporting your favorite charities, you probably think about writing a check or donating appreciated securities. For charitable-minded investors or business owners, donating privately held complex assets–other than cash or publicly traded securities–may be a tax-efficient alternative, resulting in a substantial charitable gift.

Donors may minimize capital gains taxes while qualifying for an immediate fair market value income tax deduction of the donated asset. This double tax benefit allows the highest possible percentage of the asset’s value to go to charity.

However, donations that involve complex assets are more complicated than cash donations. As a result, not all charities have the capability to accept these gifts.

The Jewish Federation’s Center for Jewish Philanthropy does have the resources and expertise for evaluating, receiving, and liquidating these assets. When complex assets are transferred to a Donor Advised Fund at the Jewish Federation, they may be sold without incurring capital gains taxes, and the donor may receive the maximum tax deduction allowed by law for their donation. In turn, the donor can support multiple charities on their own timetable.

Common complex assets accepted include:

• Real estate
• Business interests, including partnerships and interests in LLCs
• Restricted and closely held stock
• Select cryptocurrency
  

Because every situation is unique, the first step in making a gift of complex assets is to consult with legal and tax advisors; the Jewish Federation does not provide legal or tax advice. The donor is also responsible for obtaining a qualified appraisal to establish the value of the gift for federal income tax purposes.

Timing is another important consideration when making a gift of real estate or closely held business interests. Sale negotiations cannot have proceeded to the point at which the IRS would consider it a prearranged sale.

Before accepting an asset, the Jewish Federation will perform due diligence to determine its rights and obligations, if any, and the marketability of the asset.

The Jewish Federation may decline any gift not deemed to be in its best interest. If the Jewish Federation does agree to accept the asset, the donor then makes an irrevocable charitable contribution, by legally transferring the asset to the Jewish Federation.

In most cases, the Federation will liquidate the asset at its earliest opportunity. The donor can then use their Donor Advised Fund to recommend grants to causes they care about.

If you are interested in donating complex assets to a Donar Advised Fund, please contact the Jewish Federation’s Center for Jewish Philanthropy. The staff will be happy to learn more about your circumstances and discuss how best to meet your goals. Please reach out at least several weeks before the anticipated date of the gift to ensure sufficient time for the due diligence process.

For more information regarding the Donor Advised Funds Program, please call the Jewish Federation’s Legacies and Endowments Department at 312-357-4853 or email us at[email protected].

Gifts of complex assets can involve complicated tax analysis and advanced planning. This article is intended to be a general overview of some donation considerations and is not intended to provide tax or legal guidance. As always, please consult with a tax or legal advisor.