The time is right for charitable giving of 'complex assets,' especially to donor advised funds, thanks to the rise in mergers and acquisitions and IPOs over the past year, and the growing ranks of boomer business owners who are looking to exit their businesses and are thus anticipating a liquidity event.
That was the takeaway from a conversation on Thursday with Karla Valas (left), who heads the Complex Assets Group that focuses on donations of such assets—noncash, illiquid assets, often nonpublic shares of S-Corp or C-Corp stock—for Fidelity Charitable Gift Fund.
The insight was supported by the most recent report from the Gift Fund, which found that donations of these assets quadrupled in the first quarter of 2011, to $24 million, or 9% of all contributions to the Fund, compared to $6 million, or 2% of all donations, in the first quarter of 2010. "The real wealth in this country is in private businesses and real estate," Valas said, neither of which is particularly liquid.
Valas says the spike can also be attributed to "growing awareness" among investors and their advisors of the value of gifting private assets as well as public assets for both tax-reduction purposes and legacy reasons.
She cautions, however, that gifting private stock can be a complex, lengthy process to both accommodate the sale of that private stock and to comply with Internal Revenue Service regulations, particularly when it comes to not running afoul of the IRS's 'anticipatory assignment of income' rules (See IRS Bulletin addressing in part this section of the IRC).
