Since 1998, charities have been able to own S corporation stock (“S stock”). However, the ownership of S stock by an exempt organization may result in either an unexpected tax burden or a liability rather than an asset for the charity. This author’s recent experiences with several clients seeking to include gifts of S stock in their charitable planning well illustrated how challenging this planning objective can be.
The purpose of this column is four-fold: draw attention to the unrelated business taxable income (UBTI) tax pitfall that exists when a charity owns S stock; consider the tax factors for a charity using either a corporation or a trust to hold S stock; (3) use of a Code Sec. 509(a) Type III “supporting organization” (SO) to reduce the UBTI tax; and the possible use of an SO to reduce the excess business holdings tax pitfall that exists when a private foundation owns S stock.
Originally Published in the Journal of Passthrough Entities - July/August 2014.
Please see full Article below for more Information.
Firefox recommends the PDF Plugin for Mac OS X for viewing PDF documents in your browser.
We can also show you Legal Updates using the Google Viewer; however, you will need to be logged into Google Docs to view them.
Please choose one of the above to proceed!
LOADING PDF: If there are any problems, click here to download the file.