Part 42

Thomas M. Boles, 33, G.C.
Director of Development
La Habra, California

The benefits of charitable giving can be increased by understanding the steps of a prearranged sale.

Some of our members own their own businesses, and just maybe they are in the process of selling them. If you are one of those people, here is some information regarding “Prearranged Sale.” When a corporation is being sold, prospective donors frequently seek help from advisors regarding tax advantages. While the advisors would prefer that donors always make the gift during the early stages of the proposed transaction, it is human nature to delay until the last possible moment. However, one may delay too long.

In a recent case, the Tax Court agreed with the IRS that the donors had waited too long and the gain had “ripened.” Instead of getting stock and bypassing capital gain, the donor family members had reported the gain on their personal return and were giving cash to the charities. Since this result was not clear until nine years after the actual transaction, there would undoubtedly be additional taxes and substantial interest payable from the family to the IRS.

When a corporation is sold to another corporation, there are four customary, distinct steps in the transaction. These are 1) the signing of a letter of intent, 2) a vote by the directors of the two corporations to approve the transaction, 3) a vote by the shareholders of the corporation being sold, and 4) a closing.

The Letter of Intent: This initial step is typically not a legally binding document; rather, it is a description agreed upon by the directors of both corporations of the general structure of the proposed transaction. It is a working document designed to enable the two corporations to proceed eventually with a sale on the basis of terms set forth in the letter of intent.

The Directors Vote: After the terms have been agreed upon in principle, the directors of the selling corporation will then vote on final terms of the sale. The vote by the directors is generally not binding, since there is an understanding by both boards that the shareholders of the selling corporation will also have an opportunity to vote on the transaction.

The Shareholders Vote: If the vote is to accept the offer, then the transaction is final in the view of the IRS. Thus, donations must be made before this step in the process.

The Closing: After the closing of the transaction, the gain has now been recognized, and there is no possibility of avoiding the gain by gifting shares to charity or to a charitable trust.

I realized this information is not for everyone; however, if we can help just one person, we’re doing our job. Whatever your interest, let me hear from you, and we will do our best to give you accurate, beneficial information. Remember, however, that this column is not intended to offer legal, accounting, or other professional services. Which leaves my “ad” for this month to read: “Ripening is not only found on trees”

Please Note: This information is distributed with the understanding that the author is not engaged in rendering legal, accounting, or other professional service. If legal advice or other expertise is required, the services of a competent professional should be sought. From: A Declaration of Principles jointly adopted by a Committee of the American Bar Association and a Committee of Publishers.

Illustrious Boles Installed Grand Orator In California
On October 15, 1997, Ill. Thomas M. Boles, 33, G.C., Director of Development for The Supreme Council, was installed as Grand Orator of the Grand Lodge of California for 1997-98.

Ill. Boles is a Past Master of Wisdom Lodge No. 202, Pasadena, and has been active in Freemasonry for nearly 50 years. His Masonic affiliations and offices include the York Rite, Past Potentate of Al Malaikah Shrine Temple, Former Director and Treasurer of the Shrine Hospital in Los Angeles, an Active Member of the Supreme Council of the International Order of DeMolay, Past Sovereign of the Red Cross of Constantine, Past Sovereign Master of the Allied Masonic Degrees, Royal Order of Jesters, Royal Order of Scotland, and the York Rite College where he has been recently elected to receive their highest honor, the Purple Cross. He is also a member of the Grotto, Sciots, High Twelve Club, National Sojourners, Inc., and both the Scottish Rite and Southern California Research Societies.

A World War II veteran of the U.S. Navy, Ill. Boles is currently studying for his Masters of Theology Degree at Fuller Theological Seminary in Pasadena, California.

Brethren Benefit From Pooled Income Fund
What is one of the better ways you can benefit yourself and your family and, at the same time, support the Scottish Rite and its Childhood Language Disorders Program? The answer is simple: The Scottish Rite Pooled Income Fund!

The Scottish Rite Pooled Income Fund allows you and, if you wish, your wife and/or other beneficiary(ies) to receive a worry-free lifetime income as well as attractive tax benefits by joining the Fund via a financial gift to The Scottish Rite Foundation, S.J., USA. For more information call, 1-800-486-3331 or fax 202-387-1843.

Grand Commander Kleinknecht will personally respond to your inquiry. If he is not available, please leave your name and number, and the Grand Commander will return your call at his earliest opportunity. Through the Scottish Rite Pooled Income Fund, you can do well for yourself and your family while also doing good for others!