Charitable Gifts Made by Corporations: Opportunities and Challenges

Publication Date


Document Type



This article examines the tax opportunities and tax hazards when a subchapter S corporation makes a charitable gift. The article demonstrates that usually the shareholders of an S corporation and the charity are both better off when an S corporation makes a charitable gift compared to having a shareholder make a charitable gift of S corporation stock. Either way, the income tax benefit will be on the S corporation shareholder’s personal income tax return. By having the S corporation make the gift, the parties avoid the “three bad things” that happen when a shareholder donates S corporation stock. The problems and solutions for a charitable gift of S corporation stock are analyzed in the companion article: Charitable Gifts by Subchapter S Corporations and Their Shareholders: Two Worlds of Law Collide, 36 ACTEC L.J. 693-768 (Spring 2011).

The opportunities include the ability to donate corporate property to a charitable remainder trust (CRT), a temporary enhanced income tax deduction for a gift of appreciated property (such as a conservation easement), the ability to avoid the Section 1374 built-in gains tax (even with a gift to a CRT), and the avoidance of the unrelated business income tax (UBIT).

The article also identifies hazards and ways to solve them. For example, an S corporation should avoid making a charitable gift to a charity while the charity is also a shareholder. It could be a prohibited “second class of stock.” Even a charitable gift to an unrelated charity can be a problem: a gift of a substantial portion of the corporation’s assets could be treated as a taxable corporate liquidation. Professor Hoyt identifies ways to reduce or even eliminate the potential tax liability triggered by such a large gift.

Publication Title

ACTEC Law Journal