Sun Descending on Deductions to Private Foundations

Sun Descending on Deductions to Private Foundations

News story posted in Compliance on 17 June 1998| comments
audience: National Publication | last updated: 18 May 2011
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Summary

Internal Revenue Code Section 170(e)(5) provides a full fair market value income tax charitable deduction for gifts of long-term publicly traded stock to private non-operating foundations. However, this deduction is scheduled to "sunset" on June 30, 1998.

Internal Revenue Code Section 170(e)(5) provides a full fair market value income tax charitable deduction for gifts of long-term publicly traded stock "to" or "for the use of" private non-operating foundations as defined in section 509(a) (other than private foundations described in section 170(b)(1)(E), which already receive full fair market value deductibility). However, this deduction is scheduled to "sunset" on June 30, 1998. If not extended, gifts of publicly traded stock to private non-operating foundations will provide a deduction based on the lesser of fair market value or the donor's adjusted cost basis.

Congressional representatives have indicated that it is highly unlikely that the continuation of this deduction will be passed before its expiration. It also appears that Capitol Hill is generally in favor of extending this provision - exactly how, when, and at what cost, has yet to be determined. The Council on Foundations has indicated that the failure to extend this legislative measure in the past has caused a noticeable drop in such gifts. The timing of this failure is particularly unfortunate considering the significant rise in the market.

Without any guarantee that the deduction will be reinstated prior to year-end, donors may wish to consider completing such transfers prior to July 1, 1998 to assure full deductibility.

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