The benefits of private stock donations

Deducting the value of illiquid common stock

Real World Recommendations from Experts in the Field

Contact Information and Disclaimer

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Benefits to Donors

Support a charitable cause

Receive substantial cash savings from reduced taxes A form of Partial Liquidity for illiquid stock

Recognition with charity and community as a major donor

Entire process handled by OVP – simple, fast, cost effective and rewarding

Is donating private stock a common and accepted donation practice? Answer: Large institutions including Stanford and Harvard have been accepting private stock donations for years.

Sample Tax Savings Calculation

Assumptions: Donor has gross income of $300k per year for six years and $1 million

Fair Market Value in private stock Appreciated stock is limited to a 30% annual deduction from gross

income

The donor saves $243,000 over 6 years

Simplified ScenarioEst. Gross Income Over 6 Years

$1,800,000

Maximum Deduction (30%)

$540,000

Marginal Tax Rate 45%Total Tax Savings $243,000

Tax Rules for Private Stock Donations

Appreciated stock donations (value above investment) allow for a deduction up to 30% of a donor’s annual adjusted gross income

Stock donations with a basis allow for a deduction up to 50% of a donor’s annual adjusted gross income – IRC election 170B (requires modeling to determine if worthwhile)

Donations must be to IRS recognized charities

Deductions are against ordinary income

Deductions beyond annual limit carry forward for 5 years

Approximate tax savings equal an individual’s marginal tax rate (federal + state) multiplied by the value of securities donated

To qualify for a deduction, the donation must be accompanied by an independent valuation appraisal The appraiser must sign off on your form 8283

For specifics, see the IRS Bulletin on Noncash Charitable Contributions (http://www.irs.gov/irb/2006-46_IRB/ar13.html)

Why You May Not Have Heard About This

Private security donations have languished despite enormous private company wealth because:

Very few charities accept private stock donations Lack resources and expertise to screen, manage and value private securities

Unable to respond to a donor’s accountant, board, counsel and transfer agent

Donors lack the time and resources to navigate a complex private stock donation process Unable to locate an acceptable charity that also takes illiquid stock

Lack time to facilitate internal transfer process (accounting, legal, transfer agent)

Require tax expert to confirm tax savings and optimize donation amount

Valuation Appraisal required for noncash donations over $10,000, excluding public stock Outside valuation firms have historically been very expensive ($25,000-$50,000+)

How we add value

OVP works with a select group of IRS-recognized charities that share the following traits: Accept private security donations

Strong values and reputation in the community

Clear objectives and efficient use of proceeds

Experienced management

We provide a detailed valuation report and manage the entire donation process The fee typically represents a small percentage of the savings achieved

by the donation

We can tie this into other compliance valuations (e.g. IRC 409A)

Do I need to get board approval for my donation? Answer: Getting board approval should be straightforward since donors’ private holdings are being used as part of a charitable donation, not for cash sale.

Conclusion

Contact Information

Oxford Valuation Partners provides valuation and advisory services to leading private emerging growth companies and investors. Our experienced professionals assist clients with regulatory compliance, litigation support, charitable donations of private stock, mergers and acquisition support, dispute resolution and portfolio valuation.

T: 212 464 7178E: info@oxfordvp.com

NEW YORK244 Fifth Avenue, 274GNew York, NY 10001

LONDON71-75 Shelton StreetCovent GardenLondon WC2H 9JQ

oxfordvp.com

Profiles

Sanjay Gandhi, General Counsel Sanjay has worked on valuation and regulatory engagements across e-commerce,

mobile applications, social media, life sciences, online marketing and financial services.

Wealth of experience in operating and advisory roles to companies and investors over the past 15 years Advised Fortune 500 clients on M&A and strategy at McKinsey & Company

Practiced corporate and securities law with leading international law firms

Built a venture program for the United Nations across Africa and Asia

Masters of Law, University of Oxford; Law, McGill University and the University of New South Wales; Undergrad: Finance and Economics

Admitted: NY Bar (2001); Executive Committee, VC Law and Technology Section; Member - Tax and Business Law committees.

Boards: Advisory Board for Business & Ethics (Wharton/UPenn); Kopernik, a a non-profit that brings critical technologies to developing countries.

OVP Staff: Selected Certified Reports