The team here at the community foundation is committed to helping nonprofit organizations in our community identify savvy ways to inspire donors to make endowment gifts, especially in these challenging economic times. Indeed, helping you facilitate gifts of unusual assets is a service the community foundation loves to provide.
When you (and your donors) think about "unusual assets," real estate and closely-held stock may come to mind first. Those assets can make excellent gifts to charity. But don't forget about gifts of intellectual property such as royalties, patents, and trademarks, which, under the right circumstances, can be strong contenders among the wide range of options for a donor to give to your endowment.
The community foundation can help you, your donor, and the donor's advisors identify the tax rules associated with gifts of intellectual property. For starters, you and your donor need to take note of what's known as the "fruit of the tree" principle. In short, this rule means the IRS will not allow a taxpayer to give away an asset's income–and the corresponding tax liability--without the taxpayer also giving away the asset itself.
Valuation is also an important consideration with gifts of intellectual property assets, just as it is with any hard-to-value asset. Before your donor gets too far down the road with giving a patent, for example, it is crucial to understand how that gift will be valued in the eyes of the IRS and to what extent it is considered long-term capital gain property.
Here's the takeaway: Talk outside the box. In your conversations with donors about year-end gifts this season, ask a general question that might open up new sources of philanthropy. A possible conversation starter: "Do you own any patents, trademarks, or other intellectual property? Many donors are exploring how to structure gifts of these assets, especially as the stock market continues to present challenges for making traditional gifts of securities."
Even if a donor is not ready to part with the intellectual property itself, the donor–an author, for example–might be open to directing honorariums to your endowment fund at the community foundation. While honorariums are still considered taxable income to the donor, the gesture is nevertheless significant not only in terms of the actual dollars, but also as a way for the donor to publicly show support for your organization's future and inspire other donors to support your endowment, too.
Our team looks forward to hearing about your giving season conversations. We are always happy to help!