Rare but Powerful “Charitable Exits”: Know It When You See It

by SCF Team | November 10, 2025 | Siouxland Community Foundation Blog, Advisor Resources |

If your client base includes business owners, you’re probably familiar with the benefits of donating closely held business interests to charity. Still, the finer details can get complicated—and that’s understandable. Most advisors encounter only a few of these opportunities over an entire career. The key is recognizing them early and reaching out to the Siouxland Community Foundation team to help structure the best possible outcome for your client.

Let’s look at how this might unfold for a hypothetical client, Alex Monroe, who may resemble some of your business-owner clients.

• When Alex began thinking about selling his company, he mentioned it casually in conversation. Because you knew Alex had a history of generous charitable giving, you listened closely and reconnected with the Siouxland Community Foundation in anticipation of a deeper discussion.
  
• You also knew the value of Alex’s company had grown significantly, creating substantial unrealized capital gains. If Alex sold without additional planning, a large portion of the proceeds would go toward capital gains taxes, reducing the value of his hard-earned success.
  
• Some business owners in Alex’s position would immediately begin courting buyers, setting an asking price, and moving quickly toward a letter of intent. In doing so, they often overlook strategies that could improve their post-sale results.
  
• In Alex’s case, you suggested involving the community foundation early in the process. You explained that he could consider giving a portion of his company’s shares to a donor-advised fund at the foundation before any formal sale discussions begin.
  
• By making this charitable gift in advance of the sale, the shares owned by the donor-advised fund would not trigger capital gains for Alex. Instead, the donor-advised fund would receive the proceeds free of capital gains tax and ready to be used toward Alex’s philanthropic goals. This strategy also delivers an estate tax advantage by removing the gifted shares from Alex’s taxable estate.
  

Whether you encounter a case like Alex’s once or many times during your career, the most important takeaway is to involve the Siouxland Community Foundation early in a client’s business exit planning. These transactions require time and careful navigation to avoid common pitfalls. For example:

• A qualified appraisal is essential to comply with IRS rules for charitable deductions on gifts of non-cash assets. Failure to meet these requirements can eliminate the deduction.
  
• To avoid capital gains taxes, there must be no formal sale discussions, shareholder votes, or signed letters of intent before the gift of shares. Otherwise, the IRS could disallow the charitable deduction.
  
• These transactions are typically more effective when the stock is given to a public charity, such as the Siouxland Community Foundation, instead of a private foundation. Many tax advisors are unaware of the significant differences in tax benefits between these types of entities. The community foundation carefully reviews each proposed gift to ensure compliance and feasibility.
  

At some point—whether next month or several years from now—you’ll likely work with a charitably minded business owner ready to explore selling a business. When that happens, or anytime charitable giving enters the conversation, the Siouxland Community Foundation is honored to be your first call.