The Justice Love FoundationIncrease your gift to the Foundation—and your tax deduction—with a simple strategy. Contact our Team for additional assistance.
Planning on Donating LLC & Limited Partnership interests to The Justice Love Foundation
Donating your business interests before selling a company can allow you to give more to the Foundation
Now You can Donate LLC and LP Interests to the Foundation
If you own an interest in a privately held LLC or limited partnership that may have a future liquidity event, by donating a portion of your interests to the Foundation ahead of time could result in two major benefits:
1. An income tax charitable deduction for the fair market value on the date of contribution.
2. Minimized capital gains tax; capital gains tax generally does not apply to assets donated to charity.
Donate LLC or limited partnership interests into the Foundation Opportunity Fund and you may see even more advantages; the opportunity to recommend how the contribution is invested, and which causes it supports, potentially growing it tax-free, and ultimately providing greater support and giving to social justice causes.
Fair market value, as determined by a qualified independent appraisal.
How does it work?
Because Justice Love Foundation is a 501(c)(3) public charity, capital gains taxes don’t apply on the sale of the LLC or limited partnership interests that you donate. That means your tax deduction AND your gift to charity can be larger.
A larger gift and a larger deduction
Consider this example of donating stock to The Justice Love Foundation.
This assumes all realized gains are subject to the maximum federal long-term capital gains tax rate of 20% and the Medicare surtax of 3.8%. This does not take into account state or local taxes, if any. And we Assume no Unrelated Business Income Tax (UBIT) and does not take into account limitations on itemized deductions.
The illustration above assumes all realized gains are subject to the maximum federal long-term capital gains tax rate of 20% and the Medicare surtax of 3.8%, and that the donor originally planned to sell the stock and contribute the net proceeds (less the capital gains tax and Medicare surtax) to charity.
Total Cost Basis of Shares is the amount of money you have invested in the shares of a particular fund or individual security. It represents the basic dollar amount that, when compared to the price at which you sell your shares, tells you how much of a capital gain or loss you have realized.
This assumes all realized gains are subject to the maximum federal long-term capital gains tax rate of 20% and the Medicare surtax of 3.8%. This does not take into account state or local taxes, if any. And, the amount of the proposed donation is the fair market value of the appreciated securities held more than one year that you are considering to donate.
Unrelated Business Income Tax from charitable contributions
While charitable organizations are generally exempt from income tax, contributions of certain “pass-through entities” that are taxed as partnerships rather than as corporations can create tax liability for the charity in certain circumstances. Partnerships and most multi-member LLCs are taxed as flow-through entities; thus, if they engage in an active trade or business or have acquired assets with debt, the charity may be subject to Unrelated Business Income Tax (UBIT) on its share of the entity’s income. Gifts of indebted interests may trigger negative tax consequences for donors and recipients. In addition, the charitable deduction, for those who itemize, must be reduced by the amount of ordinary income that would have been realized if the interest had been sold at fair market value on the date contributed. Always consult with a tax advisor prior to donating interests in flow-through entities.
While tax-exempt charitable organizations do not generally pay federal income tax, certain “pass-through entities” that are taxed as partnerships rather than as corporations can create unrelated business income tax (“UBIT”) liability for a charity. As a “pass-through” entity, a partnership is generally not taxed at the entity level like a corporation. Rather, the partnership’s income, deductions, losses and gains “pass-through” to its partners providing one level of tax rather than two levels of tax like in a corporation. While this can be a tax-efficient structure in certain instances, charitable contributions of partnership interests involve complex tax issues for both the donor and the recipient charity.
UBIT liability may result from trade or business income allocated to the charity by a partnership during its holding period. Additionally, proceeds from the sale of a partnership interest attributable to “debt-financed income” may result in UBIT liability. To the extent that the Foundation has UBIT liability arising from a contribution, it will allocate such costs to the applicable account.
In addition to these complicated and fact-specific matters related to UBIT, each donor should consult the donor’s tax and legal advisors with respect to the donor’s own tax treatment, including, but not limited to, limitations on deductions for portions of gain that would have been short-term capital gain to the donor if he or she were to sell the contributed partnership interest and the potential tax implications of contributing partnership interests with non-recourse debt.
Certain publicly-traded entities (such as master limited partnerships or “MLPs”) may also be “pass-through entities” taxed as partnerships. Although traded publicly on an exchange, those entities can present the same complex tax issues discussed above. Please contact us prior to making a contribution of equity in a MLP or any other publicly-traded “pass-through” entity.
Please note that this page only discusses contributions of entities taxed as partnerships. While many multi-member LLCs are taxed as partnerships, certain LLCs may be treated for federal income tax purposes as disregarded entities, C corporations or S corporations. The issues presented for such LLCs may be different than those discussed above. All donors should discuss contributions of partnership interests with experienced tax or legal advisors. The Justice Love Foundation does not provide either legal or tax advise.
Donating LLC & Limited Partnership interests to our Foundation: It’s an excellent choice
Determine whether the contribution prior to the sale would result in an anticipatory assignment of income. If the IRS determines that the sale was prearranged, you may lose the ability to take a tax deduction and be required to pay capital gains tax.
- Provide more money to the Foundation
- Eliminate capital gains tax exposure
- Take a tax deduction
Let Our Donations Team Assist with a Plan
Nearly half of high-net-worth donors do not take advantage of tax-saving methods that could help them save and give more. Let our Donations Team help you with the opportunity to position yourself by having a quick conversation on the best structure for charitable giving to the Foundation. Please take your time and submit your questions below, we will respond as quickly as possible.
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