I was with a donor talking about a cause and an organization his family cares deeply about. As we talked about how The Signatry is working alongside them, he said, “I’m a little embarrassed. My connection with The Signatry was just transactional at first.”
I knew exactly what he meant.
It is the story of many donors at The Signatry. The donor is approaching a business exit and facing a significant tax consequence, and an advisor says something about a gift-before-sale tax strategy. At first, the asset-giving opportunity just seems like a good solution to a frustrating situation. But as the donor recognizes how much more money could flow to their chosen charities, they start to think bigger about what their generosity could achieve. They start to get excited. Their giving becomes transformational.
Sometimes it starts as an idea from an advisor, a ministry leader, or perhaps a friend or colleague. The key is to say something.
“Did you know that you may be able to reduce your taxes by donating part of your business before it sells?”
“Did you know that you might be able to give more from the same portion of your sale?”
Nonprofit fundraisers, you don’t need to know all the details about noncash gifts, but you do need to say something. Let people know what opportunities exist. If you have donors who own businesses, say something.
When a business sells, the owner is likely to face the highest tax liability they will ever face. That liability is locked the moment the owner signs the purchase agreement. Unfortunately, in the rush to complete the sale, the only thing the owner has time to do is to calculate the taxes he will owe. That amount is already set.
Let’s circle back to the donor at the beginning of this story. His advisor said something.
It’s pretty simple If an owner donates some of their ownership interest prior to the sale…
- they can deduct the fair market value of the shares donated.
- their taxable capital gains are decreased.
- the portion donated to a nonprofit organization is subject to lower capital gains taxes after the business sells.
Taxes go down. Giving goes up. But the gift of the ownership interest must occur before the purchase agreement is signed, or the opportunity for minimizing tax and maximizing generosity is lost.
Donors who connect with The Signatry to give a business interest to a donor advised fund don’t stop with that transaction. They now have a tool for ongoing generosity: they can gather their family around shared values and causes, and they have realized the power of minimizing tax and giving more.
Nonprofit leaders, advisors, and friends, be sure to say something. This opportunity isn’t limited to business interests; it can include real estate, farmland, oil and gas interests, stocks, and cryptocurrency.
Say something. It just may help someone else realize transformational generosity.