If you donate a business to charity - can a reasonable valuation for the value of the business be deducted from your taxes.
We own a small manufacturing business and are thinking of donating the entire business to a charity to use for a work-study type situation. If we could deduct the value of the business from our taxes, we would call that a win for all involved. Let’s say the value of the infrastructure plus some multiple of the net yearly income.
Is this an option? Any help is greatly appreciated.
My guess is the valuation number in your mind is greater than you could sell the business for to someone paying with a checkbook. The pay with a checkbook type number is how the IRS values donations of items as I understand things.
I’m not sure about the valuation, I would think the bigger challenge would be whether you would be able to find a charity that would be interested in taking your donation. Have you actually got a charity in mind that would be open to taking your small manufacturing business?
Sure, it’s an option. That said, I would strongly suggest getting a professional appraisal and consulting an attorney who is well-versed in taxes, including charitable deductions. I would point out that the ‘value of the infrastructure’ when considering the balance sheet is the depreciated value, not the market value.
I would also caution that since it would be a non-cash deduction, your deduction would likely be limited to 30% of your AGI.
Given the limitation for an annual donation from AGI and you do not plan to over value, why not sell the business and make your charitable donations over a period of time. The IRS can’t quibble about the value of currency.
Yes - They are actually quite interested. It is a school for developmentally disabled children. It looks like we will be able to sell it to them for a minor amount, so the tax deduction question no longer applies. Thanks for all the help everyone.