Case Studies in Donor Services

Donor’s Goal:  Simplify gift of appreciated stock to benefit multiple charities.

Background:  Donor owned a listed stock which was significantly appreciated in value.  Donor had difficulty making and documenting stock transfers to multiple charities.

Community Foundation Solution: Donor opened an advised fund at the Community Foundation.  Donor annually makes a single stock transfer to Community Foundation. The Community Foundation liquidates the stock and provides the necessary tax documentation to the donor.  Donor makes grants to multiple agencies from his donor-advised fund.

Results:  Donor received a tax deduction for the fair market value of the stock (an amount in excess of his basis).  Documentation for tax purposes has gone from several acknowledgements from multiple agencies to a single acknowledgement from the Community Foundation.

Donor’s Goal:  Avoid capital gains on privatization of Harrah’s stock and provide for future charitable giving.

Background:  Donor owned a significant amount of Harrah’s stock at an extremely low basis because of prior ownership of Holiday Inns/Promus. Harrah’s is being taken private in a transaction that will result in mandatory cash takeout of the donor’s shares, generating a very large capital gain.

Community Foundation Solution: Donor opened an advised fund at Community Foundation. Donor transferred Harrah’s shares to the Community Foundation. The Community Foundation liquidated the stock at the market price.  Proceeds were placed in the donor’s donor-advised fund.

Results:  Donor received a tax deduction for the full, fair market value of the stock.  Donor avoided capital gains taxes on the difference between the proceeds and his basis. Donor can make grants to charitable agencies with the full proceeds of the sale.

Donor’s Goal: Simplify bequests to several charities upon the donor’s death. The donor wants to be able to change the list of charitable beneficiaries over time without having to constantly revise his will.

Background: Donor supported a wide variety of charities throughout the Memphis community. He wished to provide major bequests to certain of them upon his death.  For a number of reasons, the specific charities that the donor wished to include in these bequests have shifted over time.

Community Foundation Solution: Donor has named his donor-advised fund at the Community Foundation as the principal beneficiary of his will. He has stipulated in his fund agreement which charities he wishes to receive funds upon his death.  He updates that list annually with a written notice to the Community Foundation.

Results: Donor is able to carry out his charitable intent, make changes to those wishes over time, and leave his estate documents unchanged.

Donor’s Goal: Contribute closely held stock to provide for future charitable giving

Background: Donor's principal asset was stock in his private company. He wished to use a portion of that stock to provide a perpetual source of funds for his charitable giving.

Community Foundation Solution: Donor contributed closely held stock to the Community Foundation, which resold the stock back to the company for cash and a 15-year note.

Results: Donor received a tax deduction for the fair market value of the stock (an amount far in excess of his basis).  The proceeds from the sale of the stock were placed in an endowed fund at the Community Foundation.  Donor grants out income on an annual basis. To date, total grants from the fund exceed 50 percent of the amount of the original gift, and the fund balance is larger than the original gift.

Donor’s Goal:  Avoid a portion of the taxable gain on potential sale of donor’s company

Background:  Donor was an owner of a closely held company which he was considering selling. Any sale would generate a considerable taxable gain to the donor.

Community Foundation Solution: The donor contributed a significant portion of his stock in the company to a donor-advised fund at the Community Foundation.  The donor subsequently sold the company, thereby liquidating the Community Foundation’s position in the stock.

Results:  Donor received a tax deduction for the fair market value of the stock (an amount far in excess of his basis). With the sale of the company, the donor avoided significant capital gains taxes. The proceeds from the ultimate sale of the stock were placed in the donor's donor-advised fund.

Donor’s Goal: Contribute land to provide for future charitable giving while avoiding capital gains

Background: Donor's principal asset was undeveloped land in which his basis was well below current market values.  He wished to use a portion of his holdings to provide for charitable giving.

Community Foundation Solution: Donor contributed land to the Community Foundation, which resold the land at the current market rate.

Results:  Donor received a tax deduction for the fair market value of the land, thus avoiding capital gains taxes on the difference between the sale price and his basis.  The proceeds from the sale of the land were placed in the donor’s donor-advised fund at the Community Foundation.

Donor’s Goal: Contribute art collection to generate a tax deduction but maintain the collection intact

Background: Donor had amassed an art collection in which he had invested considerable money. The collection had increased in value over time.  Donor wanted to recoup some of his investment, but he wanted to do so without liquidating the collection. His preference was to maintain the collection intact for the benefit of the Memphis community.

Community Foundation Solution: Donor contributed the collection to the Community Foundation. The Community Foundation lent the collection to a local museum for conservation and display.

Results: Donor received a tax deduction for the fair market value of the collection.  By so doing, he recovered a portion of his investment and avoided capital gains taxes on the appreciation in its value. The collection will be maintained in perpetuity in his name.

Note: The donor also had a private foundation, but if he had made the same gift to his private foundation, he would only have been able to deduct his basis in the collection rather than the full market value.

Donor’s Goal:  Provide perpetual support for specific charities after the donors’ deaths

Background:  The donors were two sisters who had no children and wanted their estates to provide perpetual support to the institutions that they had supported during their lifetimes.

Community Foundation Solution: An endowed donor-advised fund was capitalized with the proceeds of three separate trusts upon the death of the second sister.  Their wills provided for lump sum gifts of $500,000 immediately (including $150,000 to the Community Foundation’s Community Partnership Fund), with the balance reinvested and the income paid out annually to a designated list of seven charities, including both of their churches.

Results:  To date, the fund has paid out nearly $1.5 million in grants, and the fund balance is growing.  The sisters’ legacy will support these seven charities in perpetuity.

Donor’s Goal:  Support charities of interest during donor’s lifetime and include his children and grandchildren in the decision-making process so the successive generations learn to understand and share his philanthropic interests.

Background:  Donor has been a significant supporter of a few charities. He makes grants annually to support these organizations. He expects to leave substantial charitable assets upon his death, and he wants to teach his children and grandchildren about the importance of philanthropy, particularly in supporting those causes that are close to his heart.

Community Foundation Solution:  Donor meets annually at the Foundation’s offices with his extended family, including his wife, adult child and grandchildren.  At each meeting, the family discusses grants, reviews of investment policies, and tracks investment performance. 

Results:  Donor is able to carry out his current charitable wishes, and he believes that his interests will be carried out in the future by his children and grandchildren based on his example and their experience with the decision making process while he was alive.

Donor’s Goal:  Provide for children's and grandchildren's charitable giving after the death of the donors.

Background:  Husband and wife had varied assets and wanted to leave them for the charitable use of their children and grandchildren.  In the process, they also wanted to maintain their current lifestyle and to simplify taxation on their estate.

Community Foundation Solution:  Donors opened a donor-advised fund and provided for it with three different gift types:

1. Purchased a second-to-die life insurance policy, naming their donor-advised fund as the beneficiary
2. Named their donor-advised fund the beneficiary of their retirement plans
3. Named their donor-advised fund as the beneficiary of a charitable remainder trust

Results:  Provided a multi-million dollar legacy after their deaths for the charitable use of their children and grandchildren while supporting their current lifestyle with the income on the CRT, gaining a tax deduction in the current year for the present value of the CRT’s future benefit, and avoiding estate taxes on their retirement plans

Donor’s Goal:  Provide scholarships for minority students to attend college in order to prepare them to teach in the Memphis City Schools.

Background:  Donor attended LeMoyne-Owen College and taught in the Memphis City School system for 45 years.  She would like to help the next generation of teachers prepare to serve in the city school system.  Her preference is to provide a scholarship for students who would like to teach to attend LeMoyne-Owen.  Given the recent history at LeMoyne-Owen, however, setting up a scholarship fund at LeMoyne-Owen might risk the loss of those funds if the college should close, and her legacy would be lost.

Community Foundation Solution: Donor opened a scholarship fund at the Community Foundation.  So long as LeMoyne-Owen is open and operating, scholarships will be made to students interested in attending LeMoyne-Owen and subsequently teaching in the Memphis City Schools.  If for any reason LeMoyne-Owen ceases to meet that need, scholarships would be available to minority students to attend any university provided that they intend to come back and teach in the Memphis City Schools.

Results: Donor was able to provide perpetual scholarship funds to prepare teachers for service in the Memphis City Schools.  At the same time, she was able to support LeMoyne-Owen, her alma mater, while protecting her legacy from potential adverse events at the college.

Donor’s Goal:  Provide outdoor summer camping experience to special needs children from Memphis.

Background:  During her lifetime, Theodora Trezevant Neely had an interest in getting urban children out of the city to experience life and nature.  She had a particular interest in children who wouldn’t normally have the opportunity to enjoy such an experience.

Community Foundation Solution:  A portion of Ms. Neely’s estate was placed in an endowed fund at the Community Foundation. Each year, income from that fund goes to several Memphis agencies that have summer camps outside the city.

Results:  Ms. Neely's generosity has provided a perpetual source of funds to send children to camp and to support the agencies that sponsor these camps.  Each year, approximately 200-250 kids from Memphis go to camp as a result of Neely camperships. The specific agencies that receive funding have changed over the years as agencies' ability to hold summer camps have changed. Recent grant recipients include the Chickasaw Council of the Boy Scouts, Girl Scouts Heart of the South, Boys & Girls Clubs of Greater Memphis, the Memphis Leadership Foundation, and the Tennessee Hemophilia & Bleeding Disorders Foundation. Ms. Neely's legacy lives on.