Jun 1, 2011 12:00 PM

By Laura H. Peebles, tax director in the Washington, D.C. office of Deloitte Tax LLP

Anyone who has checked the news lately knows that mergers and acquisitions are picking up. And as sure as baseball follows college basketball, philanthropy follows liquidity events. There are several reasons for this. Some reasons are obvious: Charities don't like illiquid assets such as closely held stock or partnership interests; owners don't like sharing control or information with a charity as a co-owner; or the owner may be unsure of the ultimate value of his business and may not be sure he has “enough” (as he defines it) for himself, his retirement and his family. But with a liquidity event in the offing, the clouds around the issue of “enough” begin to lift. Other reasons are less obvious. For example, once a liquidity event is on the horizon, whether through a merger with a public company or an all-cash deal, many owners begin to feel a sense of gratitude or generosity toward their communities. They often express that feeling in a last-minute call to their attorneys or accountants, asking if it's too late to donate some of their target company to a charity. (An impending tax bill may prompt that call as well.)

Although it's never too late to make a donation, it may indeed be too late to make an “effective” donation. Here, “effective” means making the donation enough in advance of the consummation of the deal to avoid taxing the donor on the gain inherent in the donated property. Step over that line, and the donor is taxed on the income even though the charity gets the proceeds. Unfortunately, the time between the onset of the philanthropic urge and the “too late” moment is sometimes less than the time between the Final Four basketball games during March Madness and the first pitch on baseball's opening day.

Topics of Interest

Estate Tax	Donor Advised Funds
GSTs	Family Offices
Private Foundations	Life Insurance
2010 Tax Act News	Industry Trends Surveys

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Topics of Interest

Estate Tax	Donor Advised Funds
GSTs	Family Offices
Private Foundations	Life Insurance
2010 Tax Act News	Industry Trends Surveys

E-Newsletter Signup

2011 Trust Glossary

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50 Years Ago This Month

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50 years ago, in May 1962, we featured articles such as: "Future of Canadian Trusteeship" by Arthur H. Mingay", "Training Trust Employees" by Ian M. Marr, "What is a Trust Officer?" by Eric J. Brown, and "Selling Services" by Donald I. Webb.

Conrad Teitell's Guide to Tax Benefits For Charitable Gifts

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