Exploring Noncash Charitable Contributions with Clients
Since most American citizens’ wealth is held in non-cash assets, many of your clients may be interested in gifting these types of assets to their church or other nonprofit organization. Some nonprofits might not be equipped to facilitate such gifts, but this should not be an impediment to your client’s generosity goals. Navigating noncash charitable contributions is a specialty of The Signatry. Gifting complex assets provides your client the opportunity to use more of their resources to deepen their Kingdom impact. But with added complexity, gifting these assets requires extra planning and care. Our team can bridge the knowledge and experience gap. We can work with you and the donor to review issues such as timing, taxes, and potential risks and benefits to help determine if a complex, noncash charitable contribution is the right choice. When might a noncash charitable contribution make sense? Complex asset gifts are a natural by-product of major liquidity events you may be discussing with your clients and investors—especially C-suite executives, business owners, and entrepreneurs. The key is to complete the donation before your client sells the asset. Complex assets often have a low-cost basis, which can generate large capital gains and capital gains taxes. Gifting these assets can significantly lower (or eliminate entirely) capital gains taxes while providing income tax deductions on the fair market value of the asset. What steps are involved in preparing a noncash gift? To determine the fair market value of a complex asset, you and your client must arrange a qualified appraisal of the asset. There are restrictions on the timing of the appraisal relative to the potential gift, and the obligation to obtain the appraisal falls to the donor. The donor is also responsible for submitting an IRS Form 8283 with his or her tax return, which states the gift’s fair market value. The form must be signed by the appraiser, the organization receiving the gift, and the taxpayer. Every noncash charitable contribution looks different Because complex assets vary so much (from closely held business interests to real estate and more), the process for each asset gift differs. This is where our team can help. Please let us know if you would like to discuss any upcoming liquidity events or complex asset gift scenarios. You can also visit the Generosity Calculator on The Signatry’s website to explore the variables between traditionally selling a complex asset or gifting the non-cash asset to charity.
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