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Accepting pre-IPO, non-publicly traded stock

  • 1.  Accepting pre-IPO, non-publicly traded stock

    Posted 10-28-2021 11:26 AM
    Is there a best practice on accepting these types of gifts? Are you willing to share your process if your organization accepts them at all? I'm not too familiar, but seems to pose more issues than is beneficial. As a K-12 school, representing an interest in an operating business doesn't seem right. We currently do not have a gift acceptance policy for accepting these types of gifts, but lets say it's decided that we will accept the stocks - with no readily accessible market - how would you value the shares?

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    Seth Kao
    Advancement Services Manager
    Wildwood School
    skao@wildwood.org
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  • 2.  RE: Accepting pre-IPO, non-publicly traded stock

    Posted 10-28-2021 11:58 AM
    Seth, the typical way these deals get done is that the closely-held, non-publicly-traded stock (CHNPTS) is donated, then immediately sold back to the business for cash (noting that requiring such a sale-back provision has negative tax implications and should be avoided). This is an effective tax avoidance technique because the donation can be valued on FMV, rather than cost basis, which is usually very low in this situation. You definitely need an appraisal and advice of counsel in going down this road.

    Because of the complexities, one option is to have the donor donate the stock to a foundation that has the specialized experience in these types of transactions, and have that entity contribute the proceeds of the eventual sale to you, minus whatever their take will be. 


    Thank you,
    Isaac Shalev
    Data Strategy Expert
    Sage70, Inc.
    (917) 859-0151
    isaac@sage70.com

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