By Shelley Hoss
Did you know that nearly any asset you own,real estate investments, private equity holdings, limited partnership interests, even your business,can be put to work for the causes you care about and trim your tax bill?
As part of the Orange County Community Foundation’s mission to encourage, support and facilitate philanthropy in the county, it helps local business leaders, investors and entrepreneurs minimize capital gains and estate taxes and maximize their philanthropic impact by taking best advantage of their assets.
The result? A double bottom line of benefit for the individual and the community.
Here are some tips:
n Find the hidden advantage in the full range of assets you hold.
Many investors own appreciated assets they ultimately would like to sell. But most haven’t been informed about the ways their assets can be used to accomplish both financial and philanthropic objectives. If a portion of the asset is gifted to a charity prior to the asset’s sale, the charitable tax deduction offsets the capital gains tax.
With this sale/part gift approach, your family and your favorite charity benefit and your tax liability is reduced.
Professional advisers,lawyers, accountants and financial advisers,understand how powerful charitable giving can be as a tax strategy. One local investment adviser has put into practice the advice he provides to his clients: to integrate charitable giving with tax planning for maximum impact.
Charles Cencibaugh, a certified financial planner and adviser with RS Crum Inc. of Newport Beach, gifted a portion of his own real estate property to charity prior to selling. The end result was a significant tax savings on the sale of the property and the ability to set up a donor-advised fund, from which he can make grants to charities.
“The concept of reducing taxes and being charitable at the same time is very appealing,” Cencibaugh said. “I recommend that business owners and entrepreneurs consider gifting to charity a portion of property they own before selling any real estate. This is a win-win for the client, who has offset capital gains, and the charity, which receives much-needed funding to accomplish their vital mission.”
n If you’re planning to give back to your community, don’t give money that has already been taxed.
Consider instead donating an appreciated asset. Healthcare executive and local philanthropist Dick Allen has successfully leveraged appreciated assets for charitable purposes for more than 25 years.
“By gifting appreciated assets, my wife and I are able to give more to charitable causes that are important to us. The entire principal can be put to work toward the missions of the organizations we’re supporting,” said Allen, president of DIMA Ventures.
The alternative would be to sell the asset, pay capital gains taxes and then write a check for a lesser amount.
Allen and his wife are avid supporters of the Juvenile Diabetes Re-search Foundation and the Mary and Dick Allen Diabetes Center at Hoag Memorial Hospital Presbyterian, where he serves on the board.
Allen is a faculty member of the Stanford University Graduate School of Business where he teaches a course on managing growing enterprises. He brings his passion for philanthropy into the classroom.
“I tell my students that success isn’t about making money,it’s about making a difference. I encourage them to be just as entrepreneurial and creative with their charitable time and money as they will be in business,” Allen said.
n Think strategically: A giving plan can provide focus and improve success.
Seasoned business leaders know that a well-researched strategic plan can illuminate the path to success. The same is true for philanthropy. Charitably-minded people are increasingly developing strategic giving plans to maximize tax advantage and optimize the impact of their contributions to community organizations.
To start achieving a double bottom line for your own financial benefit and that of the community, talk to a local nonprofit professional. Many offer sophisticated charitable and tax-planning resources. Although not every nonprofit can accept complex assets, development and gift planning professionals can help you identify strategic ways to give. And be sure to circle back with your tax adviser so they can ensure that your philanthropic plans are in alignment with your overall financial goals.
Wondering how to get the most value out of the range of assets you hold? Using effective tools to minimize your tax liability and strategically giving back to your community is a great way to boost your double bottom line.
Hoss is president of the Orange County Community Foundation.
