Closely Held Stock: Case Study

The following is an illustration of how this type of donation works.

Phil owns virtually all of the stock in a company he founded as a young entrepreneur. Its current valuation is $2 million. Phil's cost basis is zero because his original investment has long since been written off for tax purposes.

The corporation has $200,000 in retained earnings, and Phil is concerned that the IRS may question the retention of this amount and decide to impose a second tax on it. Moreover, he has wanted to make a major contribution to us. So, Phil gives us $200,000 worth of his stock, and both he and PETA accomplish their goals.

Phil's Tax Benefits

• Phil receives an income tax deduction of $200,000. He avoids federal taxes on the capital gain, plus possible taxes at the state level, too.
• His corporation solves its potential retained earnings problem, including a potential federal penalty tax on accumulated earnings.
• Phil retains full control of his company.
• PETA receives $200,000 once the stock is redeemed.

To learn more about supporting PETA and animals today with a gift of closely held stock, contact Tim Enstice at 757-962-8213 or plannedgiving@peta.org.