This month, the Tax Court revived a method to defeat conservation deductions with its October 10 opinion published as Palmolive Building Investors LLC et al. v. Commissioner, No. 23444-14; 149 T.C. No. 18 (Oct. 10, 2017), holding that if a taxpayer donates a conservation easement, the Treasury Regulations’ requirement that any mortgage must be subordinated to the conservation easement includes subordination of the mortgagee’s rights to insurance and condemnation proceeds.
Due to increased valuation of public and private equities, coupled with the upcoming end of the sunset provision that allows hedge fund managers to defer taxation on fees earned offshore, there is an increased interest among hedge fund and private equity managers to donate a portion of their fund interests to charity. The goal is to allow a manager to avoid ordinary income or capital gains tax and/or to obtain a tax deduction while accomplishing his or her philanthropic goals. In order to make the most of any such charitable giving plan, managers need to appreciate that the amount of any charitable deduction will vary depending on the character of the donated property and the type of organization that receives the gift.
The case of Salus Mundi Foundation et al v. Commissioner
On August 15, 2016, the Tax Court decided in Salus Mundi Foundation et al v. Commissioner, T.C. Memo. 2016-154, that two foundations were liable as transferees for a corporation’s unpaid federal tax liability after another foundation distributed to the foundations the proceeds of the sale of the corporation’s stock.
The history in this case involves a marital trust that initially owned all of the stock in a C corporation called Double-D Ranch. Later, a portion of the stock was transferred to the Diebold Foundation in New York. Subsequent to that, the Diebold Foundation in New York sold the stock and distributed the proceeds from the sale of Double-D Ranch stock to three foundations formed by the Diebold children, pursuant to a New York state-approved plan of dissolution.
This month more than 2,500 people gathered at the ninth Social Capital Markets (SOCAP) conference, billed as the intersection of money and meaning. The conference is designed to be the place where businesses built to solve the biggest problems meet investors, peers, partners and those who make it happen. Launched in 2008 in the midst of the economic crises, the conference has grown is size and scope. Coblentz was thrilled to have had the opportunity to sponsor, attend and speak at this event and we came away with the following takeaways:
The Tax Court, in a case of first impression, has recently ventured into the perpetuity minefield. One Dr. Douglas Carroll and spouse Deirdre Smith, of Baltimore, Maryland, conveyed a conservation easement in 2005 over approximately 26 acres of open land in Maryland, mostly pastureland zoned for agricultural uses, to the Maryland Environmental Trust (MET) and the Land Preservation Trust (LPT). The former organization is a quasi-governmental agency, the latter a private, nongovernmental exempt organization. The protected property consisted of two parcels of unequal size; upon the smaller parcel sat the taxpayers’ two-story primary residence, and, on the larger, a small (1,000-square-foot) house where a farmhand tenant resided.
A promise to give is not a guaranteed charitable gift.
In an open letter to their newborn daughter last December, Facebook CEO Mark Zuckerberg and wife Priscilla Chan announced they will eventually give 99 percent of their Facebook shares during their lives to a variety of important social causes. Over the past several months, commentators have expressed both enthusiasm and concern with the manner in which the couple chose to commit their wealth to advancing these causes. Continue Reading What Does the Chan Zuckerberg Initiative Mean for Modern Philanthropy?
On April 25, 2016, Joan and Sandy Weill announced their donation of $185 million to establish the UCSF Weill Institute for Neurosciences in an ambitious effort to accelerate the development of new therapies for diseases affecting the brain and nervous system, including psychiatric disorders. This is the largest single donation in UCSF History. Learn more in the video below, or read about the donation here.