[OCcardinal]

Question for smarter people than me.  If I were a billionaire (I wish, but please indulge me) and I wanted to make a lasting donation to Stanford but didn’t want my donation to get taxed, could I just establish the “Boston Card Family Foundation to Support Stanford” and donate money to that foundation, whose annual payout goes to support Stanford football expenses.  It is essentially an endowment, but it is operated by the non-profit foundation and thus not officially part of the endowment.

Is that a thing?

BC

I am a tax planning expert, but whether you donate directly to Stanford or to a private foundation, there are annual limits on the amount you can deduct from income.

It's possible that Freeman could deduct the entire amount in one year, but excess contributions can be carried over for 5 years.  It's also possible he already has the money in a private foundation or he could disburse the money over a period of years, which is common with large gifts.  I would guess that Stanford football could use a big chunk of this contribution in the next few years.

The reason I hang out here.  Actual expertise! Many thanks.

I'm a tax lawyer. I think Boston Card's question was about how to avoid the new 8% tax on endowment profits. I was thinking about this exact problem.  I haven't vetted it yet, but a multi-year pledge accompanied by a donation to a separate private foundation seemed like a good option.  The only issue is that you are assuming that your foundation's profits would be able to keep up with the endowment's profits.  The Stanford Management Company is really good at what they do.  They have a 14.2% 5-year annualized return despite the need to be conservative in some of their investments.  If you had $50M in the foundation, a 14.2% return for the year would be $7.1M. If the same amount were in Stanford's endowment, the tax on that would be $568K, resulting in an after tax return of $6,532,000 (or 13.06%).  So, whoever's managing your foundation would be required to earn a return of greater than 13.06% to make you any better off.  If they earn less you are worse off.  I don't know that the Federal taxes are material enough to make it worth taking that risk.

[OCcardinal]

Question for smarter people than me.  If I were a billionaire (I wish, but please indulge me) and I wanted to make a lasting donation to Stanford but didn’t want my donation to get taxed, could I just establish the “Boston Card Family Foundation to Support Stanford” and donate money to that foundation, whose annual payout goes to support Stanford football expenses.  It is essentially an endowment, but it is operated by the non-profit foundation and thus not officially part of the endowment.

Is that a thing?

BC

I am a tax planning expert, but whether you donate directly to Stanford or to a private foundation, there are annual limits on the amount you can deduct from income.

It's possible that Freeman could deduct the entire amount in one year, but excess contributions can be carried over for 5 years.  It's also possible he already has the money in a private foundation or he could disburse the money over a period of years, which is common with large gifts.  I would guess that Stanford football could use a big chunk of this contribution in the next few years.

The reason I hang out here.  Actual expertise! Many thanks.

I'm a tax lawyer. I think Boston Card's question was about how to avoid the new 8% tax on endowment profits. I was thinking about this exact problem.  I haven't vetted it yet, but a multi-year pledge accompanied by a donation to a separate private foundation seemed like a good option.  The only issue is that you are assuming that your foundation's profits would be able to keep up with the endowment's profits.  The Stanford Management Company is really good at what they do.  They have a 14.2% 5-year annualized return despite the need to be conservative in some of their investments.  If you had $50M in the foundation, a 14.2% return for the year would be $7.1M. If the same amount were in Stanford's endowment, the tax on that would be $568K, resulting in an after tax return of $6,532,000 (or 13.06%).  So, whoever's managing your foundation would be required to earn a return of greater than 13.06% to make you any better off.  If they earn less you are worse off.  I don't know that the Federal taxes are material enough to make it worth taking that risk.