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Posted by Seth Breidbart on December 8, 2006, 2:07 am
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> does it work? can it work?
>
> Private corporations owner donated shares in it to charity.
> Charity (voluntarily ??) redeems shares for cash.
> Owner gets deduction for full value (mostly appreciation).
> Corpoartion empties its coffers tax free
> Owner still in full control of corp.
> How can that be??
> Owner starts out and leaves with full control and still has
> tax deduction.
Just that method used to be better for the owner than
keeping the money: tax rates were as high as 70% (sometimes
higher), so the trick worked.
With current rates, it doesn't work as well (there's
after-tax cost rather than benefit to doing it), but the
situation you describe should be the case *provided that the
charity makes the decision to sell the stock*. (If the
stock is donated subject to an agreement to redeem it, I
think a different rule kicks in.)
Note that while owner starts out and leaves with full
control and gets a tax deduction, the company has less
value.
Seth
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