Day 5: Tax-Efficient Charitable Planning – How Donating Shares Can Reduce Your Tax Bill

5 Tax Issues to Consider Before Selling Your Business to Reduce the Tax Burden

Day 5: Tax-Efficient Charitable Planning – How Donating Shares Can Reduce Your Tax Bill

Most business owners think about tax planning after the sale, but a huge opportunity to reduce taxes happens before the sale—by donating shares.

🚀 Why Donating Shares Before Selling Saves Taxes

✅ Avoids capital gains tax on the donated portion.

✅ Provides a charitable deduction equal to the fair market value of the donated stock.

✅ Reduces taxable estate for wealth transfer planning.

📌 Cited in IRC: Charitable stock donations follow IRC § 170.

Example: How a Business Owner Saved $1.5M+ in Taxes

• John plans to sell his business for $20 million.

• Instead of selling, paying capital gains tax, and donating after-tax cash, he donates $2 million in shares to a Donor-Advised Fund (DAF) before selling.

• He gets a $2M charitable deduction AND avoids capital gains tax on that portion.

📌 Result?

• He saves $600,000 in capital gains tax (15-20% rate).

• He gets a $2M deduction, saving another $900,000 in income taxes.

• Total tax savings: $1.5 million.

🚨 Important Notes:

• You must donate before the sale closes to get full tax benefits.

• A Donor-Advised Fund (DAF) allows you to donate now, but distribute funds to charities later.

Final Thoughts: How to Reduce Taxes When Selling Your Business

Selling a business is life-changing, but tax planning is essential. Without the right strategies, you could lose millions in unnecessary taxes.

Key Takeaways:

✔️ Structure the sale properly (asset vs. stock sale).

✔️ Use installment sales and earnouts to reduce upfront taxes.

✔️ Check if you qualify for QSBS to eliminate capital gains tax.

✔️ Donate shares pre-sale to maximize charitable tax deductions.

Want to Minimize Your Tax Bill? Let’s Talk!

Selling a business is complex, and taxes can take a huge bite out of your wealth. Want to make sure you keep more of your money?

📩Drop a comment or message me to discuss your situation!🚀