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I am changing empolyers. I own some stock in the company and want to donate it to my church to avoid capatial gain tax. The problem is the company stock can only be owned by employees of the company. I must sell the stock back to the company on my last day. Is it possible for Me to donate the stock to the church and the church turn around and imediatly sell it back to the company. The CFO of the company is open to the idea but wants me to verify it with some accounting types.

The price of the stock is set at the fiscial year end by an outside accounting firm. There is no problem establishing the cost basis or sale price.

Will this work with the IRS?


I am sure that you realize such a transaction if successful would not only avoid the capital gain tax but would also lighten your checkbook by the after-tax proceeds. That's fine if you intended to gift the full value of the stock in any event by whatever means.

But I think you could have an even worse result. If the stock certificates are restricted and therefore the simultaneous transaction precludes the charity's holding unfettered title to the stock, this would be deemed a step transaction. The entire proceeds would go to the charity and you would be deemed to have sold the stock and gifted the cash. You would be liable for the tax. That's ugly. This would be true even if the CFO papered the transaction your way. That's because the charity did not receive the stock unconditionally. I haven't researched this question but believe that you would want to seek a substantive legal opinion or a CPA's written opinion with authority supporting a positive conclusion.
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