Tax Updates & Succession Insights

Your March Content

“Season” has certainly kept us busy. Between meeting with donors and their Professional Advisors to design and finalize philanthropic plans during the day and attending galas that sometimes stretch into the wee hours of the night, it has been a full and exciting time of year.

We are grateful for your continued partnership. We’re seeing more and more of your clients seeking philanthropic planning opportunities, which tells us you recognize the value of working together with Gulf Coast. Thank you for the trust you place in us and for the opportunity to collaborate in serving your clients.

Thanks to that partnership, we are approaching an exciting milestone, we are close to surpassing $600,000,000 in assets under management and another $500,000,000 in our legacy pipeline. We would not be nearing those marks without your confidence in our services and in the care we provide to your clients. We know you have many options, so it is truly an honor to work alongside you to help charitable clients maximize both their community impact and their financial and estate planning goals.

As always, the Gulf Coast Team continues to monitor trends closely so we can keep you informed of legal and policy developments that may impact your work with philanthropic individuals and families.

GOOD INTENTIONS ARE NOT ENOUGH: Two Important Tax Rulings

In two recent rulings, the underlying message is consistent: Courts and the IRS continue to apply the technical requirements governing charitable deductions with precision. Your clients’ good intentions are not enough.  

Strict substantiation: A familiar but critical reminder

Gibson v. Commissioner serves as yet another reminder that it is really important for your clients to substantiate their charitable deductions. Time and again, both the IRS and the Tax Court have disallowed a taxpayer’s deduction because rules were not followed. In Gibson, a married couple claimed nearly $194,000 in noncash charitable contributions related to donated personal property. The court did not dispute that tangible items were transferred to a charitable organization. Instead, the deduction failed because the taxpayers did not satisfy the detailed substantiation requirements—specifically, contemporaneous written acknowledgments and qualified appraisal standards.

No matter how strong a client’s desire to make a difference through charitable donations, technical compliance drives deductibility. Form 8283 thresholds, appraisal rules, and acknowledgment language are not administrative formalities; they are statutory requirements. The Gibson case provides a practical example to share with clients who may be inclined to “drop off” significant in-kind gifts without first consulting their advisory team.

Exempt status is not forever

The lesson in Milk Saving Starving Children Foundation v. Commissioner is that if you say you’ve got milk, you’d better have milk! In Milk, the Tax Court upheld the IRS’s revocation of 501(c)(3) status for an organization that failed to operate exclusively for charitable purposes and conferred impermissible private benefits. The organization’s stated mission—to distribute milk—was in fact charitable. Over time, though, its operations drifted away from distributing milk to operating a coffee shop and hosting a golf tournament.  

Here’s why we’re sharing this case:

• The Tax Court’s written opinion in Milk provides a great overview of the legal principles behind one of the cornerstones of tax-exempt status: a charity’s ongoing activities must further its exempt purposes. As you bring new attorneys, CPAs, and financial advisors into your practice, the Milk case is terrific for training purposes.  
• As it applies to your client work, remember the Milk case when a client expresses interest in supporting a lesser-known or newly formed organization. Please reach out to Gulf Coast in these instances because our team can provide insight on any charitable organization, whether well-established or new—and offer safeguards through field-of-interest funds and other vehicles.

Thank you for the opportunity to work together to serve your charitable clients. Our goal, as always, is to serve as a practical resource—helping you ensure that your clients’ charitable intentions are fulfilled with clarity, compliance, and confidence.

CASE STUDY: Business Succession Planning & Family Dynamics

As an attorney, CPA, or financial advisor, you probably work with several clients who own a family business. You’ve likely also considered that there may be a role for strategic philanthropy in family business succession planning to help clients get ready for an eventual exit. But so what? How does strategic philanthropy actually play out in conversations with a real client?  

Here’s a case study to illustrate a scenario that may be helpful:

When Mark and Elaine come into your office to update their estate and financial plans, retirement is only part of the future picture they’d like to discuss. At 66 and 64, they are financially secure, but the larger question looming in the background is the future of the family business. After three decades of ownership, they are beginning to explore a sale within the next few years.

The first part of your conversation is very familiar: income projections, portfolio sustainability, and how the family business’s corporate structure could evolve to allow Mark and Elaine to step back from day-to-day operations. If you are their financial advisor or CPA, you might run the models, stress-test assumptions, and outline what taxes and retirement could look like if a liquidity event occurs. If you are their estate planning attorney, you might review the company’s legal structure and emergency transition plans.  

In any case, you know the numbers are strong. A sale would more than fund Mark and Elaine’s lifetime needs. But as your conversation deepens, a more complex issue surfaces: what does succession look like—not just operationally, but reputationally and relationally?

“Our two adult children are not active in the business,” says Mark. “A third-party sale is inevitable, and we are fine with that financially, but it’s a gut punch emotionally.” A concerned expression crosses Mark’s face as he considers his feelings about a sale to non-family members. “The company’s name carries a lot of weight in the community,” he says. “For years, the business has been closely associated with the family’s identity and local impact. So what happens to that identity if we sell?” Mark wonders aloud.

Elaine’s concern is more inward-facing. “I really want our children to stay aligned after a liquidity event. For so many years, company events and trips have been where we’ve all gathered. I hate to think of that ‘glue’ disappearing in an instant.” Elaine says she has seen other families fracture after a business sale. “They barely see each other anymore,” she remarks.

This is where you introduce a broader planning lens. 

You validate that a business sale is not only a financial event. It is deeply personal and public at the same time. “How the family positions itself before, during, and after that transition can shape both community legitimacy and internal unity for decades,” you say. “So you both are spot on with your concerns.” 

You suggest that philanthropy, structured intentionally before a sale, can serve as a bridge. What you mean is that Mark and Elaine could explore the option to transfer shares in the business to a donor advised fund at Gulf Coast well in advance of any potential transaction. Then, when the business is sold, a portion of the proceeds lands in their donor advised fund. 

The tax advantages of the transaction are meaningful. By donating a portion of closely held stock before a legally binding sale process begins, Mark and Elaine are eligible for an income tax deduction, subject to AGI limitations, based on the stock’s fair market value at the time of the gift. Later, when the business is sold, the proceeds on the shares held by the donor advised fund are not subject to capital gains tax. 

Still, you emphasize that tax efficiency is only one layer. 

Creating a donor advised fund before the sale allows the family, working together, to articulate a charitable mission while the business is still operating. It signals continuity: although ownership may change, the family’s commitment to the community does not. 

You suggest to Mark and Elaine that the Gulf Coast Team join the next meeting. Of course, you remain responsible for facilitating the transaction and coordinating with other advisors. But Gulf Coast’s philanthropic advisors can facilitate conversations that go beyond the corporate, legal, financial, and tax aspects, leading a dialogue focused on questions that will shape the family’s philanthropy plan, such as: 

• What causes reflect the values that built the business?
• How should the family’s name be represented post-sale?
• What governance structure will guide the next generation’s involvement? 

You also share with Mark and Elaine that Gulf Coast can host structured family meetings, provide community needs assessments, and introduce best practices for multigenerational philanthropy. Importantly, this gives the children a meaningful role before liquidity occurs. Instead of simply awaiting proceeds, they begin working together to recommend grants, evaluate impact, and represent the family publicly. 

Mark and Elaine love this suggestion. “Let’s do it,” Elaine says. “This plan makes us feel like a future sale is less like an ending and more like a pivot.”  

Mark and Elaine’s situation is one of many examples of cases where a family business may eventually change hands. But through an intentional philanthropic structure, the family’s influence, values, and unity continue. Please reach out to our team anytime we can be of service.