With the right plan, you can make a legacy sized gift.
Tax Strategy
Selling a company is an exciting prospect. But it comes with a myriad of practical, emotional, and financial complexities. For a Christian business owner, there's an added layer of spiritual significance. What could be more profound than a legacy sized gift to expand the Kingdom?
Donor Advised Fund(s)
A Donor-Advised Fund (DAF) structure provides flexibility and control. It allows some business sale proceeds to go to ministry in a tax-efficient way.
Part of the sale proceeds are transferred to the DAF. The seller receives an immediate tax deduction based upon the fair market value of the gift. The remainder goes to the owner(s).
If appreciated assets are donated, the DAF is not subject to capital gains taxes. This allows the full value of the appreciated asset to be available for charitable giving.
Funds in a DAF grow tax-free over time if the benefactor chooses not to gift all of it at once.
The $10 Million Deduction
Many entrepreneurs, along with their investors and advisors, may be unaware of the following. Under Tax Code Section 1202, taxpayers can exclude up to 100% of the capital gains from the sale of qualified small business stock (QSBS) held for at least five years.
How much can §1202 for Qualified Small Business Stock save you? The exclusion for each taxpayer is limited to the greater of (i) $10 million OR (ii) 10 times the taxpayer’s investment. The exclusion for an entrepreneur may be on $10 million of gain, while the exclusion for an investor may be much greater.
If, for instance, an investor invests $20 million, they may obtain an exclusion for $200 million of gain ($20M x 10 = $200M).
