Many people are interested in leaving a philanthropic legacy, extending their generosity beyond their lifetime. Legacy philanthropy, known commonly as planned giving," can consist of anything from bequests to life insurance, IRAs to 401(k)/403(b), as well as charitable gift annuities. Two area experts, Theresa Zeidler-Shonat, Director of Valuation Services at Smith & Gesteland, and Ann Casey, Vice President of Finance and Operations at the Madison Community Foundation, discussed the different ways planned gifts can be structured, sound tools to make the gifting process work smoothly, and the information you need to initiate the planned giving process.

1. PUTTING THE “PLAN” INTO PLANNED GIVING
Ann E. Casey, CPA
Vice President of Finance and Operations at the
Madison Community Foundation
Theresa A. Zeidler-Shonat, ASA
Director of Valuation Services at Smith & Gesteland
1

2. ANN E. CASEY, CPA
Ann Casey is Vice President of Finance and Operations for Madison Community
Foundation, where she directs the financial and accounting activities for the
foundation's assets, including oversight for investment management and policy
development. She also assists individuals with planned giving and major gifts.
Before joining MCF in 1999, Ann spent nearly 20 years in public accounting as a Senior
Tax Manager with both Ernst & Young and Grant Thornton, focusing on tax planning for
entrepreneurial businesses, executives and high net worth individuals.
Beyond her commitment to managing philanthropy through the Madison Community
Foundation, Ann demonstrates a commitment to community through her many
volunteer activities. She is currently on the Board of the Wisconsin Planned Giving
Council and the Catholic Diocese of Madison Foundation. She is also a public board
member of the University of Wisconsin Medical Foundation, as well as its Investment
and Audit Committees.
Ann holds a BBA in Accounting from UW-Whitewater and a Masters in Taxation from
UW-Madison, and completed the Strategic Perspectives in Non-Profit Management
program at Harvard School of Business.
2

3. THERESA A. ZEIDLER-SHONAT,
ASA
As an Accredited Senior Appraiser in the Business Valuation discipline, Theresa
specializes in business enterprise, equity, and intangible asset valuations for financial
reporting, gift and estate tax, tax planning, succession planning, merger and
acquisition planning and assessment, divorce and litigation support, and SBA lending
requirements.
Theresa has performed valuations for companies in a wide variety of industries that
range from traditional service and manufacturing industries to service industries to
rapidly-changing and high-tech industries and other intellectual-property-intensive
industries. Theresa has worked with clients that range in size from small family businesses
to multi-billion dollar, multi-national firms.
Theresa takes a consultative approach to business valuation. In her role she helps
companies understand the value of their businesses, and gives them the tools and
information to understand how their actions can strengthen their business.
3

4. WHAT CAN GIVING DO?
Think of all the things that
Charitable Giving and Philanthropy
do for our Community…….
4

5. CLEAN LAKES AND WATER 5

6. LIBRARIES 6

7. EDUCATION AND OPPORTUNITY
7

8. JOB TRAINING 8

9. PARKS AND PLAYGROUNDS
9

10. ARTS & CULTURAL ACTIVITIES 10

11. HOUSING
11

12. FOOD 12

13. HOW TO GIVE
• Lifetime gifts
• Life Interest Gifts
• Planned/Deferred Gifts
13

14. OUTRIGHT GIFTS
• Cash, Check, Credit card, Text-to-Give
• Securities
– Publicly traded stock, mutual funds
– Closely-held business interests
• Real Estate, Other property
• Retirement accounts, Annuities, Life
Insurance
14

15. DONATE LONG-TERM GAIN
PROPERTY
Sell stock/
Gift Cash Gift Stock
Stock Value $50,000 $50,000
Basis 10,000
Long-Term Capital $40,000
Gift to charity $50,000 $50,000
Tax on gain 8,000 0
Tax savings of (15,000) (15,000)
Net cost of gift $43,000 $35,000
15

16. ORDINARY INCOME
• For property which would result in
Ordinary Income when sold:
– Charitable deduction reduced, or
– Ordinary Income must be recognized
16

17. ORDINARY INCOME
• Examples:
– Short Term gain property
– IRAs
– S Corps, Partnerships, LLCs
– Commercial annuities or insurance
– Real estate
17

18. LIFE INTEREST GIFTS
• Charitable Remainder Trust
– Income to individual/remainder to charity
• Charitable Lead Trust
– Income to charity/remainder to individual
• Retained Life Interest in Property
– Give home to charity; donor may live in
home
18

19. CHARITABLE GIFT ANNUITY
• Donor(s) receives lifetime income in
return for charitable gift
• Immediate tax deduction
• Annuity rate based on age
• Annuity payments partially tax-free
• Remainder of gift/fund stays with
charity
19

20. CGA SAMPLE RATES
One Life
AGE RATE
60 4.4%
65 4.7%
70 5.1%
75 5.8%
80 6.8%
85 7.8%
90+ 9.0%
Two Lives
AGE RATE
60/65 4.0%
65/70 4.4%
70/75 4.8%
75/80 5.3%
80/85 6.1%
85/90 7.3%
90/95 8.8%
20

21. GIVING VEHICLES
Private Foundation
– Separate charitable entity
– Minimum $3 million - $5 million
recommended
– Apply for tax-exempt status; annual tax
returns
– Not really “private”
– Annual board meetings, corporate
records
– Closely-held stock deducted at basis only
21

22. GIVING VEHICLES
Donor Advised Fund
– Component fund within another charity
• Community foundations
• Commercial investment companies
– Simple to create, low minimums
– No separate tax filings or record-keeping
– “Recommend” grants and distributions
– Can give anonymously
22

23. AUDIENCE POLL:
Do you have Charity in your Estate
Plan?
YES
NOT YET
23

24. LEGACY EXAMPLE
Continue Lifetime Giving
• Add to Donor Advised
Fund at CF
• Support ~30 annual
charities
• Adjust list as interests
have changed
• Payout over 10 years
• Report back to family
24

25. LEGACY EXAMPLE
One Bequest, Many Uses
• College scholarship
fund
• High school
scholarship fund
• Donor advised fund
for children
• Immediate grants to
20 favorite charities
25

26. BEQUESTS
Gift of property or
money promised to
a person or
organization upon
your death.
90% of Planned
Gifts
• Defined $$
amount
• % of estate
• Specific asset
• Beneficiary
– Bank account
– Life Insurance
– Retirement Funds
26

27. BEQUESTS
I/we give and bequeath (describe
bequest) to Madison Community
Foundation, Madison, Wisconsin, for its
charitable purposes as defined in and
subject to the provisions of the Madison
Community Foundation Trust Agreement as
it exists on this date or as they may be
amended in the future. This gift shall be
added to the Bob and Sue Smith Donor
Advised Fund.
27

28. WHAT TO GIVE TO CHARITY
• During Lifetime – Capital Gain property
– No gain recognized; full FMV deduction
– At death, taxable beneficiaries get step-up in
basis
• Gain goes away forever
• At Death – Ordinary Income accounts
– Taxable beneficiaries would be taxed on
income
– Charity pays no income tax
28

29. CHARITABLE GIFT PLANNING
What to consider
• Donor considerations
– Values and interests
– Available assets
 Valuation
 Tax consequences
 Ease and consequences of transfer
– Income considerations
 Need for future income
 Ability to generate income from gift
29

30. CHARITABLE GIFT PLANNING
What to consider
• Non-Profit considerations
– Ability to liquidate the gift
– Risks/Costs of ownership
 Valuation and acceptance costs
 Holding/liquidation costs
 Liabilities
 Tax consequences
– Capacity to honor donor intent
 Current or new program or initiative?
 Mission fit or mission drift?
 Other donor expectations
30

31. PLANNING PROCESS & TEAM
• Consult with:
– Tax Advisor
– Attorney
– Appraiser
– Giving Coordinator at Charity/Charities
31

32. WHY PEOPLE GIVE
• 2014 Study of High Net Worth
philanthropy (household income
>$200,000)
– 74% belief gift can make a difference
– 73% personal satisfaction
– 66% supporting the same causes
– 63% giving back to the community
– 62% serving on a nonprofit’s board or
volunteering for a non-profit
32

33. BUT WHAT ABOUT TAX BENEFITS
OF PHILANTHROPY?
• Only 34% of donors cited tax
advantages among their chief
motivators for giving.
• Even if they aren’t a primary motivator,
tax advantages exist.
• There are also impacts on what you
need to include in your tax return.
33

34. THE KNOWLEDGE
CONNECTION
• The study found strong relationships
between donors’ knowledge of giving
and personal fulfillment from giving.
• Donors who rated themselves “expert”
at giving both give more and gain
more fulfillment from giving.
34

35. NON-CASH GIFTS
• Most non-cash gifts
have some sort of
valuation or
appraisal
requirement
related to taking a
charitable
deduction on a
tax return.
35

36. WHEN TO DO AN APPRAISAL
• Art work(s) with a total claimed value
deduction at or exceeding $20,000
must have a complete, signed
appraisal by a qualified appraiser
attached to the return;
• Be sure to verify IRS requirements
regarding photo-documentation.
36

37. WHEN TO DO AN APPRAISAL
• Any personal property with a claimed
deduction exceeding $250 must
include with the return a written
communication from the qualified
organization containing the name of
the organization, the date of the
contribution and the amount of the
contribution
37

38. PERSONAL PROPERTY?
• General Definition:
– A type of property which can include any
asset other than real estate. The
distinguishing factor between personal
property and real estate is that personal
property is movable.
– That is, the asset is not fixed permanently to
one location as with real property such as
land or buildings. Examples of personal
property include vehicles, furniture, boats,
collectibles, etc.
38

39. WHEN TO DO AN APPRAISAL
• The donor must have an
acknowledgement stating whether
the organization provided any goods
or services in exchange for the gift
and, if so, a description and a good
faith estimate of the value of those
goods or services.
39

40. WHEN TO DO AN APPRAISAL
• Any personal property with a claimed
deduction exceeding $500 but less
than $5,000, the client must complete
Section A of the Form 8283 and attach
it to the tax return (this includes
donation of household contents
exceeding claimed $500)
40

41. WHEN TO DO AN APPRAISAL
• Any personal property with a claimed
deduction of $5,000 or more, Section B
of IRS Form 8283 must be completed
(including “qualified appraiser’s” and
donee’s signatures) and attached to
the tax return. A qualified appraisal
must be prepared for the donated
property.
41

42. WHEN TO DO AN APPRAISAL
• This applies to single items or multiple
similar items of personal or real
property.
42

43. WHEN TO DO AN APPRAISAL
43
• IRS: Appraisal for
charitable gift
deduction for tax
return must be
effective as of date
of donation or no
more than 60 days
preceding
donation.

44. POLL QUESTION
How Long do you think a
Typical Business
Appraisal Process Takes?
A. 4 to 6 months
B. 3 to 6 weeks
C. 2 to 3 months
D. 1 to 2 weeks
E. 3 to 4 days
44

45. Business Interest Appraisal Timeline
45
I.
• Project Scoping and Engagement Letter
• This typically takes a few days between initial discussions and the engagement letter
II.
• Information and Data Request
• This length of this step depends on how quickly client responds with requested information
III.
• Initial Modeling and industry research
• This portion should take 4 to 6 days to complete

46. Business Interest Appraisal Timeline
46
IV.
•Follow up questions for client
•Questions arise during step III. Timing depends on client response time.
V.
•Finish model and finalize report
•A few days to a week depending on responses received in Step IV.
VI.
•Submit final report to client
•In total process typically takes 3 to 6 weeks .

47. APPRAISAL TIMELINE
• Length it takes to complete a business
appraisal can be affected by:
– Whether the appraiser can start right away or
has other projects that must be finished
before starting yours
– Responsiveness to information
requests/follow-up questions
47

48. APPRAISAL TIMELINE
• You may also need
– Real estate appraisal
– Machinery and Equipment appraisal
– Art or Antiques appraisal
• The timelines for those are different. If they
are assets held in the business, these
appraisals need to be complete before
business appraisal can be finalized.
48

49. IRS Guidance Regarding Appraisals
for non-cash charitable
contributions
• IRC Section 170(f)(11)
• Section 883 American Jobs Creation Act
• Section 1219 of the Pension Protection Act
of 2006
• IRC Section 6695A
49

50. WHAT’S NOT DEDUCTIBLE?
• A contribution to a specific individual,
• A contribution to a non-qualified
organization,
• The part of a contribution from which the
individual receives or expects to receive a
benefit (such as sports tickets or a dinner),
• The value of time or services,
• Personal expenses.
50

51. WHAT’S NOT DEDUCTIBLE?
• A qualified charitable distribution from an
individual retirement arrangement (IRA),
• Appraisal fees (these may be claimed as
related business expenses),
• Certain contributions to donor-advised funds,
or
• Certain contributions of partial interests in
property.
51

52. WHAT’S NOT DEDUCTIBLE?
• One may not deduct a charitable
contribution of a fractional interest in
tangible personal property, unless all
interests in the property are held
immediately before the contribution by
the donor or by the donor and the
qualifying organization receiving the
contribution.
52

53. WHO CAN AND CAN’T PERFORM
APPRAISALS
• The IRS has a requirement that a
“Qualified Appraiser” is used.
• The IRS also excludes certain individuals
from performing appraisals for tax
purposes.
53

54. WHAT IS A “QUALIFIED
APPRAISER?”
• Has an appraisal designation from an
appraiser org, or
• Has met certain minimum education
and experience requirements;
• Regularly prepares appraisals for
which he or she is paid;
54

55. WHAT IS A “QUALIFIED
APPRAISER?”
• Demonstrates verifiable education and
experience in valuing the type of
property being appraised;
• Has not been prohibited from practicing
before the IRS under section 330(c) of title
31 of the United States Code at any time
during the 3-year period ending on the
date of the appraisal;
• The individual is not an excluded
individual.
55

56. APPRAISER ORGANIZATIONS
• Business Appraisals
– American Society of Appraisers (ASA)
• Accredited Senior Appraiser (ASA)
– The Institute of Business Appraisers (IBA)
• Certified Business Appraiser (CBA)
– National Association of Certified Valuation
Analysts (NACVA)
• Certified Valuation Analyst (CVA)
56

57. APPRAISER ORGANIZATIONS
• Machinery and Equipment Appraisals
– American Society of Appraisers (ASA)
• Accredited Senior Appraiser (ASA)
– Association of Machinery and Equipment
Appraisers (AMEA)
• AMEA accredited or certified
– NEBB Institute
• Certified Machinery & Equipment Appraiser
(CMEA)
57

58. APPRAISER ORGANIZATIONS
• Art and Antique Appraisals
– American Society of Appraisers (ASA)
• Accredited Senior Appraiser (ASA)
– Appraisers Association of America (AAEA)
• Certified Member
– International Society of Appraisers
58

59. APPRAISER ORGANIZATIONS
• Real Estate Appraisals
– American Society of Appraisers (ASA)
• Accredited Senior Appraiser (ASA)
– National Association of Real Estate Appraisers
(NAREA)
– Appraisal Institute
• Real estate appraisers must be
licensed/certified in the state in which the
property exists
59

60. WHAT IS AN “EXCLUDED
INDIVIDUAL?”
• The donor of the property, or the taxpayer who
claims the deduction.
• The donee of the property.
• A party to the transaction in which the donor
acquired the property being appraised, unless
the property is donated within 2 months of the
date of acquisition and its appraised value is not
more than its acquisition price. This applies to the
person who sold, exchanged, or gave the
property to the donor, or any person who acted
as an agent for the transferor or donor in the
transaction.
60

61. WHAT IS AN “EXCLUDED
INDIVIDUAL?”
• Any person employed by any of the above persons. For
example, if the donor acquired a painting from an art
dealer, neither the dealer nor persons employed by the
dealer can be qualified appraisers for that painting.
• Any person related under section 267(b) of the Internal
Revenue Code to any of the above persons or married
to a person related under section 267(b) to any of the
above persons.
• An appraiser who appraises regularly for a person in (1),
(2), or (3), and who does not perform a majority of his or
her appraisals made during his or her tax year for other
persons.
61

62. THE VALUE OF YOUR GIFT MAY
NOT BE WHAT YOU THINK IT IS…
62

63. Fair Market Value
“The price at which the property would change hands
between a willing buyer and a willing seller when the
former is not under any compulsion to buy and the latter is
not under any compulsion to sell, both parties having
reasonable knowledge of relevant facts. Court decisions
frequently state in addition that both the hypothetical
buyer and seller are assumed to be able, as well as willing,
to trade and to be well informed about the property and
concerning the market for such property.”
63
Source: IRS Revenue Ruling 59-
60

64. GIFTS OF INTERESTS IN CLOSELY-
HELD COMPANIES
• Your buy-sell agreement is probably
not “fair market value”
– The IRS requires charitable deductions at
FMV.
64

65. GIFTS OF INTERESTS IN CLOSELY-
HELD COMPANIES
• Market participate considerations?
– Value of ability to control the company
(discount for lack of control)
– Opportunity cost of investment (discount
for lack of marketability/non-liquidity)
65

66. Point in time Measurement
• Value Changes over time
• “Valuation Date” is important
66

67. Intangible Assets
• Intellectual Property (IP)
• Marketing Intangibles (Trademarks)
• Artistic Intangibles
• (there are other intangible assets that
are harder to gift)
67

68. Art and Antiques
• Auction prices may not be FMV
– Typically auction prices include both
buyer and seller fees
• Your insurance appraisal is
replacement cost, not FMV
• eBay isn’t a good source for value
estimates, either
68

69. IRS Restrictions on Charitable
Deductions for Intangibles
• The taxpayer’s initial deduction for
contributions of certain intellectual
property may be the lesser of the
taxpayer’s basis in the property or the
fair market value of the property.
69

70. IRS Restrictions on Charitable
Deductions for Intangibles
• Transfers of property are not
deductible:
– If the transfer is of a partial interest in
property.
– To the extent that consideration is
received for the transfer.
– If the transfer is inadequately
substantiated.
– To the extent the property is overvalued.
70

71. IRS Restrictions on Charitable
Deductions for Intangibles
• The fair market value of a patent must
take into account factors such as
whether the patented technology has
been made obsolete by other
technology; any restrictions on the
donee’s use of, or ability to transfer the
patented technology; and the length
of time remaining before the patent’s
expiration.
71

72. LIMITATIONS ON DEDUCTIONS
• If the donor contributes personal
property that has a fair market value
less than the donor's basis in the item,
the claimed deduction is limited to the
fair market value.
• Donor cannot claim a deduction for
the difference between the basis and
the fair market value.
72

73. LIMITATIONS ON DEDUCTIONS
• If the donor contributes property with a
fair market value that is more than the
donor's basis, the donor may have to
reduce the fair market value by the
amount of appreciation (increase in
value) when figuring the deduction to be
claimed.
• Different rules apply to figuring the
deduction, depending on whether the
property is ordinary income property or
capital gain property
73

74. LIMITATIONS ON DEDUCTIONS
• Donation of self-created works: Since
the 1970s, an artist may not claim the
fair market value of self-created works
donated by the maker to a qualifying
nonprofit organization. The artist may
only claim the cost of materials used in
creating the works.
74

75. MAKE SURE YOU AREN’T GIFTING
A PROBLEM
• Are there restrictions on transfer?
• Check your buy-sell agreement and
other corporate documents
– Can an organization outside of company
management own company equity?
75

76. MAKE SURE YOU AREN’T GIFTING
A PROBLEM
• Illustrative Example of a problem…
• Robert Rauschenberg’s Canyon
– A work of art in the estate of art dealer
Ileana Sonnabend
76

77. THE CANYON PROBLEM
Image from
MOMA.org
77

78. THE CANYON PROBLEM
Image from
MOMA.org
78

79. THE CANYON PROBLEM
Image from
MOMA.org
Taxidermied Bald Eagle
79

80. THE CANYON PROBLEM
• Under US law it can’t be sold because
it contains a taxidermied bald eagle.
• Actually, most people can’t even own
it, much less sell it.
80

81. THE CANYON PROBLEM
• Violation of:
– 1940 Bald and Golden Eagle Protection
Act
– 1918 Migratory Bird Protection Act
81

82. THE CANYON PROBLEM
• Criminal Penalties for Anyone who:
– “take, possess, sell, purchase, barter, offer
to sell, purchase, or barter, transport,
export, or import, at any time or any
manner… alive or dead, or any part, nest,
or egg thereof…”
82

83. THE CANYON PROBLEM
• Sonnabend had an exemption to own
the work based on a notarized
statement that the bald eagle was
stuffed by one of Roosevelt’s Rough
Riders prior to passage of the laws
83

84. THE CANYON PROBLEM
• However, it couldn’t be sold or
possessed by anyone else.
• How could it have a fair market value
if it is illegal to have a market for it?
• Three separate appraisers valued it at
$0
84

85. THE CANYON PROBLEM
• The IRS disagreed and said it was
worth $65 million
• They imposed penalties
• It went to tax court
85

86. THE CANYON PROBLEM
• The ultimate resolution?
• The IRS agreed to drop fines and taxes
• However, the work had to be donated
to a US Institution and the estate could
not claim a charitable deduction on it
• It is in MoMA’s collection today
86

87. WHAT’S NEXT?
• Think about
what you want
to support
• Think about
which of your
assets is best
gift to support
it (hint: it may
not be cash)
• Talk to your
legal and tax
advisors
87

88. WHAT’S NEXT?
• Talk to the giving
coordinator at the
charities you want to
support
• Line up the
appraisals you’ll
need
• Feel good about
supporting the things
that matter to you
88

89. Questions?
89

90. Theresa Zeidler-Shonat, ASA
Director of Valuation Services
Smith & Gesteland, LLP
608.828.3154
theresa.zeidler-shonat@sgcpa.com
Ann Casey, CPA
Vice President Finance and Operations
Madison Community Foundation
608.232.1763
ACasey@madisoncommunityfoundation.org
90

91. 91