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IntroductionWhen business owners think about giving to charity, a traditional cash donation often comes to mind. A better alternative may be gifting a portion of their company’s privately held stock, yet many business owners are not aware of the advantages this structure can offer. It can provide a tax deduction similar to a cash donation, but it also preserves the donor’s liquidity, as cash resources are not reduced. Arrangements can even be made to ensure that the donor will receive a lifetime income stream from the gifted stock. This report was created by a business appraiser to better inform business owners, and their advisors, about business valuation and, specifically, the gifting of privately-held stock. This report will also discuss the various steps involved in completing a business valuation, while providing important information about key factors that increase or decrease the value of a company. It is common for business owners to gift a portion of their business while considering a sale of the entire company. In this situation, it’s very important to donate stock prior to entering into a binding agreement to sell. Once a binding agreement is in place, a gift may be characterized by the Internal Revenue Service as an “anticipatory assignment of income”, which results in the gift being treated as a sale of stock, thereby resulting in a taxable capital gain on the appreciation of stock. When conducting a business valuation for charitable gifting, the majority of valuation approaches require a discount for lack of control and/or discount for lack of marketability. The last section in this report provides the reader with information regarding these discounts, and how they can be reduced to maximize the tax benefits of gifting. While information in this report is deemed to be correct, it is not intended to be a substitute for professional advice. Business owners should always consult with legal, tax and financial professionals to help determine their best options when considering any type of gift. 
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