S Corporations and Charitable Contributions of Property

S corporations are subject to their own unique charitable contribution rules. Exempt organizations should favor receiving contributions of property from S corporations over receiving S corporation stock. Contributed property can potentially be held, invested, or sold by the exempt organization without being subject to unrelated business income tax (UBIT), but in every case holding or selling S corporation stock will generate unrelated business taxable income. Shareholders should favor making charitable contributions of property at the S corporation level, avoiding the adverse tax consequences of nonliquidating distributions or constructive distributions. Structuring S corporation contributions to exempts using a disregarded single-member limited liability company is an innovative technique that offers benefits to both the donor and done. (A.F. Dana, 23 Taxation of Exempts, No. 2, 37 (September/October 2010).)