Privately Held Securities
Gifts of closely held C corporation and S corporation stock, limited liability company (LLC) ownership interests, limited partnership interests, and limited liability partnership interests can have tax advantages.
Shares of restricted stock in a publicly traded company acquired before the public offering (Rule 144 stock) can also be donated to create a meaningful impact at the Darden School of Business.
Gift Options
Your charitable gift options will depend largely on the type of stock or business interest being considered for (and the timing of) your gift. Some interests will be most tax-efficient when donated outright; others may be appropriate to fund a charitable remainder trust or to include as part of a charitable gift and family wealth transfer plan (a charitable lead trust). UVA accepts gifts of privately held securities directly or, in some cases, through a third-party charitable entity for UVA’s benefit.
- Donations of restricted C corporation stock are relatively simple.
- Donations of other types of business interests, including S corporation shares, partnership interests, and LLC interests, require careful review and planning to protect both you and UVA.
- Some interests are not transferable under the terms of a partnership or shareholders agreement.
- Some interests have capital call requirements, debt, or other liabilities that UVA cannot accept directly.
- On occasion, it may work best for the S corporation or LLC itself to donate marketable assets so the tax deduction can pass through to the owner(s).
Benefits
- Receive an income tax charitable deduction for the interest’s fair market value. Note that if you intend to claim a deduction for interests valued at greater than $5,000 (or greater than $10,000 for C corporation stock), you will need to obtain a qualified appraisal as defined by federal tax law to substantiate the claimed deduction value.
- Avoid the capital gains taxes you would incur if you sold these assets, which when combined with the income tax deduction can greatly reduce your outof- pocket cost to make the gift.
- Reduce estate and gift taxes in some cases.
OTHER CONSIDERATIONS
To claim an income tax deduction for your gift and avoid capital gains taxes:
- You must have held your interest for more than a year.
- You cannot require UVA to sell the security or interest to a specific person or entity, and you cannot mandate that UVA vote a specific way in corporate matters.
LIQUIDATING THE INTERESTS
UVA’s policy is to sell the interests in a prudent manner. While you cannot require UVA to sell the security or interest to a specific person or entity, UVA welcomes appropriate insights, reports, and suggestions relating to potential buyers as well as other information related to the assets that may help UVA make a prudent decision regarding the sale. Costs UVA incurs in receiving the asset, including the cost of performing our due diligence review, will be subtracted first from the proceeds.
USE OF THE PROCEEDS
You may direct UVA to use the net sales proceeds to benefit Darden in the ways that mean the most to you, including scholarships, faculty support, or research.
QUESTIONS?
The Darden School Foundation is happy to help you and your advisors evaluate your charitable gift choices based on the type of business interest you own.
The Cornerstone Society recognizes those who are honoring the University’s future through planned gifts, including bequests, beneficiary designations, charitable gift annuities, and charitable trusts.
The University of Virginia Darden School Foundation does not provide legal or tax advice. We recommend that you seek your own legal and tax advice in connection with gift and planning matters. To ensure compliance with specific IRS requirements, we disclose to you that this communication (including any attachments) is not intended or written to be used and cannot be used for the purpose of avoiding tax-related penalties.