POLICIES AND PROCEDURES
DATE: August 31, 2001
APPROVED: September 22, 2001
POLICY: THE JAMES MADISON UNIVERSITY REAL ESTATE FOUNDATION WILL ACCEPT GIFTS OF SHARES IN PRIVATE COMPANIES, IF THERE IS CLEAR CHARITABLE INTENT ON THE PART OF THE DONOR(S)
1. An officer of the Foundation must research the company's industry, risk factors, and trends to obtain general information about the business.
2. The Donor must obtain a qualified appraisal by an independent third party to determine value at time of gift. It must be prepared, signed and dated by qualified appraiser; prepared no earlier than 60 days prior to date of gift; and not involve a prohibited appraisal fee. Gifts of private stock that are valued at $10,000 or more require a qualified appraisal. Instructions for IRS Form 8283 set out appraisal requirements. Greater detail about required contents of appraisal can be found in IRS Regulation Section 1.170A-13( c)(3).
3. The donor must provide a copy of the company's most recent financial statements, corporate tax returns, and a copy of any shareholders agreement or other restriction governing the transfer of shares to other shareholders or third parties. This information is useful to determine potential market for donated shares, and to check against shares that cannot be liquidated.
4. Determine whether the company operates as a C-corp or S-corp structure. Further due diligence is needed for S-corp since gains on sale of S-corp stock and business income is subject to Unrelated Business Income Tax (UBIT). The donor must provide cost basis of S-corp stock.
5. At the time of gift, there must be no agreement or commitment for the donor, or company to purchase the stock back from the Foundation. If such an agreement existed, the Foundation could be deemed, as agent for donor and the donor could then be liable for capital gain taxes.
6. A plan for the sale of the stock must be developed prior to accepting the gift.
7. The Executive Committee of the Foundation must approve acceptance of private stock.