Charitable Planning Before the Sale of a BusinessCharitable Planning Before the Sale of a Business

Charitable planning in advance of the sale of a closely held business sounds like an effective way to minimize income taxes. The business owner donates stock to a charitable organization or to a charitable trust and receives a full fair market value (FMV) deduction against her income taxes, subject to certain adjusted gross income (AGI) limits. 

Using a basic example, consider a 100% shareholder contemplating a charitable gift of stock in advance of a sale. The business is worth $100 million, and the stock gift to charity is worth $20 million. The business owner will have income of $80 million ($100 million less a $20 million charitable gift) as well as an offsetting charitable deduction of $20 million, resulting in $60 million of taxable...