Tax Break for S Corporation Shareholders Making Charitable Gifts

Brittany Oates, Estate Planning Attorney

If you’re a shareholder of an S corporation, and the corporation makes a charitable donation in 2006 or 2007, you’ll get a tax break.  Usually you would have to reduce your basis in the corporate stock by a pro rata share of the fair market value of the donated property.  However, for gifts made in 2006 and 2007, you only have to reduce your basis in the corporation stock by the adjusted basis of the donated property – not its fair market value.  This is great news since the adjusted basis is ordinarily much lower than the fair market value, so your basis in the corporation stock will have to be reduced by a smaller amount.  This means when you eventually sell the stock, your basis will be higher and your taxes will be less!

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