The Power of Donating Private Stock

For startup founders and early employees, much of their wealth is tied up in private company stock. While these shares may not be liquid today, they represent a meaningful tax savings opportunity and a powerful tool for philanthropy.

Founder Benefit Example

Imagine you're a Series B founder earning $400,000 per year and own illiquid company stock worth $20 million on paper. Under IRS rules, you can deduct up to 30% of your adjusted gross income (AGI), in this case $120,000, for a private stock contribution this year and carry forward any excess for five years.

By contributing just 0.6% of your shares (worth roughly $120,000) into a DAF, you can:

• Receive an immediate $120,000 tax deduction.

• Save roughly $45,000 in federal and $12,000 in state taxes this year, depending on your bracket.

• Avoid capital gains tax on the donated shares, an additional 20 to 23.8% in tax savings compared to selling the shares later and donating cash.

• Grow the stock in your DAF tax-free. As your company valuation increases, so does your DAF balance. When a liquidity event occurs, you can grant money to your favorite charities.

Benefits of a DAF at Phil

• Lock in charitable intent and hold positions until liquidity. Unlike many DAF sponsors that require immediate liquidation, Phil can hold concentrated public and private stock positions within a DAF over time.

• The more your company succeeds, the more you can give back to charity. The company shares in your DAF grow tax-free and are aligned with your success, creating more to give away later. Once liquid, the proceeds are available to fund grants to nonprofits.

• Increased diversification and liquidity. Reduce your exposure to a single illiquid stock holding while receiving an immediate tax deduction that increases your near-term liquidity.

• Offset income at the right time. Built for liquidity events, DAFs let you offset income in high-earning years by donating stock, transforming equity from an IPO, acquisition, secondary sale, or tender offer into immediate charitable impact.

Why Donor-Advised Funds?

• Fastest-growing giving vehicle in the world. DAF assets have grown to roughly $325B in 2024 and are projected to surpass $1 trillion in the next decade.

• Easier and less costly than private foundations. Low-friction setup: opening a DAF is faster and simpler than forming a private foundation. Professional administration at a lower cost: compliance, fund accounting, and grantmaking are handled on your behalf. Private and flexible: you control the timing and direction of your giving, while maintaining privacy.

Conclusion

For founders and executives with private company stock, contributing shares to a Phil Donor-Advised Fund is one of the most seamless, tax-efficient, and impactful ways to give. It turns your hard-earned equity into enduring capital that fuels the causes you care about most.

In conjunction with the private stock donation, Phil's foundation sponsor may request that a small contribution of liquid assets (cash or securities) be donated alongside the private stock contribution to enable you to engage in philanthropic activity during the time period before a liquidity event.