EVERYONE WINS WITH
GIFTS OF CLOSELY HELD STOCK

If you own a sizable block of stock in a closely held corporation, you may obtain major benefits by turning all of part of it into a gift to the Seventh-day Adventist Church.

Suppose your corporation has retained earnings – which have been taxed on the corporate level and, if distributed as dividends, would be taxed again on the individual level – and the stock has appreciated in value.

Now you want to find a way to get retained earnings out of the corporation (perhaps there is concern that the IRS may question the retention of the amount). Selling stock would only result in a capital gains tax due, and a public sale would defeat the purpose of the stock being closely held, anyway.

What Can You Do?

Donate some shares (few enough that you retain 50% ownership) to the Church. We could present the stock to your corporation for redemption. Your corporation could use retained earnings for the purchase.

We win because the Church receives much-needed funds. Plus, you and your corporation benefit because you get an income tax deduction for the charitable contribution, you don’t pay any capital gains tax on the appreciation in value, you avoid a second tax on accumulated earnings by averting a dividend distribution, and you maintain control of the corporation. 

Observe IRS Rules

There’s one caveat: the IRS has ruled that you cannot legally bind a charitable organization to go through with the redemption at the time it receives the shares. But a charitable organization may independently offer the donated stock for redemption.

There’s little likelihood that the Church would fail to do this. We’re anxious to realize cash to support our work, and a redemption is an easier and quicker way than trying to find another buyer. So, giving closely held stock is a unique philanthropic opportunity that can benefit everyone involved.