Tax Benefits of Creating a Private Foundation
Summary
“Suppose an individual has highly appreciated stock that he or she can’t sell because of the capital gains implications or an under-diversified portfolio that’s doing little for him or her,” said Jeffrey Haskell, chief legal officer of Foundation Source. “If this individual establishes a private foundation, he or she can donate those appreciated and unproductive assets to it, sell them in a tax-advantaged environment, and reinvest the proceeds for a higher return. A donor may also be able to avoid paying capital gains taxes by donating highly appreciated assets to his or her private foundation. If the foundation sells the stock in the future, it will pay only the nominal excise tax of one or two percent on the net capital gains. For high-net-worth individuals who have a strong charitable interest, private foundations offer an opportunity to avoid paying estate taxes while simultaneously creating an enduring philanthropic legacy.
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