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He's not selling the shares. He said they "will give 99% of our Facebook shares." If he sold appreciated stock and donated the proceeds, he'd still have to pay

by cplease 11y ago

He's not selling the shares. He said they "will give 99% of our Facebook shares." If he sold appreciated stock and donated the proceeds, he'd still have to pay tax on the capital gains, and could only deduct the amount of the actual donation, which would be smaller after tax. By donating stock directly, he still gets to deduct the full value of the stock without paying any tax, and the charity (or more likely, private foundation) gets to keep the full value without paying any tax. And it could take as long as it wanted to liquidate the stock and get the best price.

bonzini 11y ago
> the charity (or more likely, private foundation) gets to keep the full value without paying any tax. And it could take as long as it wanted to liquidate the stock and get the best price. Yes, and the foundation will likely not liquidate the stock, but use the proceeds of some kind of swap contract.
cdcarter 11y ago
The Initiative is an LLC and not a public charity or private foundation, so as not to limit the activities they can take part in. This will all be taxed at some point (though the Initiative may further grant shares to public charities).
- cplease 11y ago
  Yeah, I missed this the first time around. But you are not quite correct. An LLC is a pass-through entity. No doubt it will be treated as a disregarded entity for federal tax purposes. So, gifting shares to an LLC is not a taxable event. If the LLC sells shares for a non-charitable purpose (e.g. lobbying, or funding commercial ventures), then sure, that will be taxable. But if it in turn donates shares to either a private foundation or another charity, in that case, it will not be taxable, and will in fact be deductible for the Zucks. Basically, if the Zucks own the LLC, then until funds actually leave the LLC they really haven't made a donation at all.
  - cdcarter 11y ago
    However, if the Initiative ever liquidates shares, regardless of what it does with them, they'll owe cap gains just M+P would have.

by cplease 11y ago

bonzini 11y ago

> the charity (or more likely, private foundation) gets to keep the full value without paying any tax. And it could take as long as it wanted to liquidate the stock and get the best price. Yes, and the foundation will likely not liquidate the stock, but use the proceeds of some kind of swap contract.

cdcarter 11y ago

The Initiative is an LLC and not a public charity or private foundation, so as not to limit the activities they can take part in. This will all be taxed at some point (though the Initiative may further grant shares to public charities).

cplease 11y ago
Yeah, I missed this the first time around. But you are not quite correct. An LLC is a pass-through entity. No doubt it will be treated as a disregarded entity for federal tax purposes. So, gifting shares to an LLC is not a taxable event. If the LLC sells shares for a non-charitable purpose (e.g. lobbying, or funding commercial ventures), then sure, that will be taxable. But if it in turn donates shares to either a private foundation or another charity, in that case, it will not be taxable, and will in fact be deductible for the Zucks. Basically, if the Zucks own the LLC, then until funds actually leave the LLC they really haven't made a donation at all.
- cdcarter 11y ago
  However, if the Initiative ever liquidates shares, regardless of what it does with them, they'll owe cap gains just M+P would have.