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Planned Giving with Non-Cash and Unusual Assets: From Acceptance to Disposition Bryan Clontz, CFP® Planned Giving with Non-Cash and Unusual Assets: From Acceptance to Disposition Bryan Clontz, CFP® President, Charitable Solutions, LLC [email protected] com (404) 375 -5496 All Materials Copyright 2008 -2009, Charitable Solutions, LLC

Agenda • • Non-Cash Asset Market Overview Non-Cash Asset Types A 5 -Minute Non-Cash Agenda • • Non-Cash Asset Market Overview Non-Cash Asset Types A 5 -Minute Non-Cash Tax Seminar Legislative Update Reasons Non-Cash Assets are Declined Top Ten Non-Cash Questions Three Case Studies Non-Profit Management and Disposition 2

Non-Cash Asset Market Overview • More than half of affluent investors’ assets are held Non-Cash Asset Market Overview • More than half of affluent investors’ assets are held in non-cash assets; cash only represents 3 -5% • Aggregate stock market value is approximately $14 trillion; non-cash market estimates are $40 -60 trillion • Of the $300 billion in donations last year, noncash assets are estimated to be 3% or less Source: Spectrum Group and Reality Times, June 2004 3

Non-Cash Asset Types • Real Estate – Residential vs. Commercial, Encumbered vs. Unencumbered, Partial Non-Cash Asset Types • Real Estate – Residential vs. Commercial, Encumbered vs. Unencumbered, Partial vs. Entire Interests • Privately-Held Interests – C-Corp and S-Corp Stock, Limited Partnerships or LLCs • Restricted Stock • Tangible Personal Property – Art/Collectibles (New PPA Rules) • Weird Stuff – Quarterhorse, Seat on New York Mercantile Exchange, Gold Bullion, Euro-Denominated Bond, Beach House in Mexican Land Trust, Paris Condo, UPREIT Partnership Units, Patents, Timber Deeds, Clay Mineral Rights, Book Royalties, Oil & Gas Interests, Hedge Fund Carried Interest, NFL Team, and finally, Dead Animals 4

A 5 -Minute Non-Cash Seminar • Cash BAD – Everything else GOOD! • Capital A 5 -Minute Non-Cash Seminar • Cash BAD – Everything else GOOD! • Capital gain property receives a fair market value deduction AND an elimination of capital gains tax if donated to a public charity • If donated to a private foundation, donations of non-cash assets during life only receive an adjusted cost basis deduction • Public charities do not have a 5% payout requirement – private foundations do • Donor advised funds are especially attractive for multiple grants 5

Appraisal Considerations • Appraisal may occur 60 days prior to gift at the earliest, Appraisal Considerations • Appraisal may occur 60 days prior to gift at the earliest, and the latest being the time the donor files the tax return – Donor completes Form 8283 and Charity completes Form 8282 • Pension Protection Act Key Changes – Extended Form 8282 to 3 years, Tightened Definition of Substantial and Gross Valuation Misstatement, Increased Appraisal Penalties and Definition of a Qualified Appraiser – Tightened Deductions Related to Partial Interests in Tangible Personal Property 6

80% Of All Non-Cash Gifts Rejected • Tax and Legal Complexity (UBTI, Bargain Sale, 80% Of All Non-Cash Gifts Rejected • Tax and Legal Complexity (UBTI, Bargain Sale, Palmer/Blake/Ferguson Pre-arranged Sale Issues, Agreement Complexity, Self-Dealing, Excess Benefit, Private Inurement) • Environmental Issues (Due Diligence, Remediation, Disclosures, Deep Pockets) • Management Issues (Holding Period, Insurance Changes, Contract Changes, Appropriate Filings and Paperwork) • Charity’s Internal Process (Timeliness, Thoroughness, Risk Tolerance, Weak Gift Acceptance Policies/Procedures) • Perceived Risk/Reward Ratio 7

Top Ten Non-Cash Questions • • • Asset Description/Expected Value Asset Ownership Partial or Top Ten Non-Cash Questions • • • Asset Description/Expected Value Asset Ownership Partial or Entire Interest Debt or Other Encumberances Outright, Life-Income or Testamentary Capital or Ordinary Asset Tax Implications Potential Buyers and Offer Status Holding Period and Management Issues Transfer Timing 8

Dechomai Foundation, Inc. Flow Step 1 Sweet Spot: $750 K+ Fees: 1 -3% (1. Dechomai Foundation, Inc. Flow Step 1 Sweet Spot: $750 K+ Fees: 1 -3% (1. 7% Average) DONOR CONTRIBUTES NON-CASH ASSETS Dechomai Foundation, Inc. Step 2 ASSET IS SOLD Step 3 Grant to Referring Charity $100 Million+ Since 2003 For illustrative purposes only. 9

Case Study #1 Commercial Real Estate Contribution $1. 2 million/20% Interest Four Doctors Owned Case Study #1 Commercial Real Estate Contribution $1. 2 million/20% Interest Four Doctors Owned $6. 0 Million Medical Building Four 7 Percent Charitable Remainder Trusts For Life Community Foundation Four Donor. Advised Funds $1. 2 million/20% Interest Building Purchased by Publicly-Traded REIT For illustrative purposes only. Multiple Grants To Multiple Charities 10

Case Study #2 Limited Partnership Gift Family Limited Partnership Owns $1. 6 Million Montana Case Study #2 Limited Partnership Gift Family Limited Partnership Owns $1. 6 Million Montana Working Farm Property Farm Purchased by Adjoining Land Owner For illustrative purposes only. Entire Interest DECHOMAI FOUNDATION DONOR ADVISED FUND CHARITY’S CAPITAL CAMPAIGN 11

Case Study #3 Closely-Held Business Partial Interest Family Business C-Corporation NATIONAL HEALTH CARE CHARITY Case Study #3 Closely-Held Business Partial Interest Family Business C-Corporation NATIONAL HEALTH CARE CHARITY Corporate Redemption 1. Donor Contributes Stock – Receives Full Deduction 2. Company Buys Stock Back 3. Minority Interest Holders Increase Percentage Ownership With No Gift Tax 4. Donor Creates Named Research Fund For illustrative purposes only. 12

Non-Profit Management and Disposition • Assign One Staff Person Non-Cash Responsibility to Follow Gift Non-Profit Management and Disposition • Assign One Staff Person Non-Cash Responsibility to Follow Gift Acceptance Policies/Procedures • Document/Transaction/Asset Due Diligence • Self-Dealing, Conflict-of-Interest, Private Inurement Due Diligence • Prudently Manage Asset (tax filings, insurance changes, lease/rental changes, record deeds, pay bills, oversee maintenance, etc. ) • Manage Disposition – Hold, Sell to Private Party, Redeem/Surrender to Entity, Broker in Public Market, Auction 13