Gift to M.I.T. from Bose Founder Raises Tax Questions(nytimes.com)
nytimes.com
Gift to M.I.T. from Bose Founder Raises Tax Questions
http://www.nytimes.com/2011/04/30/business/30bose.html
7 comments
How would the gift make sure Bose never faced a hostile takeover? I believe that the given shares are non-voting, so they shouldn't help or hinder a takeover.
Not the gift, but the way the gift is structured. MIT can't sell it another entity, and even if they could, non-voting shares mean they can't be used to strongarm Bose.
In otherwords, protecting Bose from MIT.
In otherwords, protecting Bose from MIT.
Hostiles are already quite rare for public companies, never mind a private one like Bose. Disgruntled equity shareholders can more easily coordinate to change management, and it's much harder for hostile purchasers to get enough information to price a bid.
I thinks this is amateur hour for NY Times.
“We don’t know much about the terms of this gift, but it seems like it clearly falls into a gray area that has been of concern to Congress,”
“If the shares truly can’t be sold so that there is some restriction on the university’s ability to transfer stock, then it would suggest it is a contribution of partial interest only, which would not be deductible as a charitable contribution,”
They don't know the actual terms of the deal. It's only speculation and they're trying to paint Dr. Bose as a law-breaker without hard proof.
Actually, the article specifically refers to the gift buy-back tax shelter which was prevalent before the 1986 tax code.
In the most common form of the gift buy-back, a donor would gift restricted stock or ownership interests to a charity. Eventually, the donor would buy back those shares/interest from the charity for the same amount as the shares were worth when donated, or less, depending on how the restrictions affected the market value of those shares.
The tax benefit to the donor was usually getting a charitable write-off on the donation without actually giving up their interest in the company.
The 1986 tax code basically killed this tax shelter, though its descendants live on in a form roughly similar to the Bose gift.
In the most common form of the gift buy-back, a donor would gift restricted stock or ownership interests to a charity. Eventually, the donor would buy back those shares/interest from the charity for the same amount as the shares were worth when donated, or less, depending on how the restrictions affected the market value of those shares.
The tax benefit to the donor was usually getting a charitable write-off on the donation without actually giving up their interest in the company.
The 1986 tax code basically killed this tax shelter, though its descendants live on in a form roughly similar to the Bose gift.
"The university needs to be more forthcoming about the arrangements behind this donation so we can get a clear picture of what’s going on."
Dripping with entitlement...
Dripping with entitlement...
This is one of those situations where I'm just happy to see a chunk of money going to a school that I'm quite fond of, and that I am confident will spend the money wisely.
As a citizen, I see a transaction of private equity between a private citizen and a private research institution, ergo none of my business.
As a citizen, I see a transaction of private equity between a private citizen and a private research institution, ergo none of my business.
From the article: "If the shares truly can’t be sold so that there is some restriction on the university’s ability to transfer stock, then it would suggest it is a contribution of partial interest only, which would not be deductible as a charitable contribution," which is why this may be of interest to federal tax authorities. On the other hand, if Professor Bose never intended to declare the gift as a tax-deductible gift to a public charity (which MIT, as an educational institution, plainly is) then this issue doesn't arise.
From further in the article: "In 2003, the Senate Permanent Subcommittee on Investigations looked into such transactions and found that in some cases, they were an elaborate way of using a charity’s tax-exempt status to erase tax liabilities for the other shareholders of the company involved." That's why this latest gift prompts interest and speculation from onlookers.
From further in the article: "In 2003, the Senate Permanent Subcommittee on Investigations looked into such transactions and found that in some cases, they were an elaborate way of using a charity’s tax-exempt status to erase tax liabilities for the other shareholders of the company involved." That's why this latest gift prompts interest and speculation from onlookers.
Oh the horror if the government doesn't get its cut and perhaps we have to end one of the wars early.
Somehow, I doubt the collection of fewer taxes will stop things like war. Instead, it's really you, me, and other taxpayers who aren't getting our cut.
I think you've got some variant of Stockholm Syndrome.
This is a donation to a non profit. I think under the typical allocation of government "revenue", at least 40% of the taxes withdrawn from the donation would be used to pay for the war.
Tax rates aren't likely to change in response to how much is actually spent, as your comment seems to assume.
Tax rates aren't likely to change in response to how much is actually spent, as your comment seems to assume.
Brilliant, a gift with a fishhook in it that makes the survival of Bose's in MIT's interest.
First, the fact that they're non-voting shares is because he wants to make a gift without altering the company. If they were voting shares, MIT might vote (in their interest) at some point to sell the company to another audio company or close the company and distribute the money it has to its investors so that they could invest in activities they saw as doing better for their endowment and long-term interests.
Second, by making the shares non-transferable, it means that MIT will be receiving income from Bose for as long as the company exists. While it's true that one can't deduct partial interests, I think there's a bit of leeway there. For example, Harvard's Weidner Library was gifted to the university with the restriction that if they ever knocked so much as a wall down, the library's ownership would transfer to the Commonwealth of Massachusetts. This was done in response to Harvard removing an earlier building that the family had donated. Now, I don't know if they deducted the library donation from their taxes and, frankly, the tax code is probably vastly different today. However, gifts are often made with conditions. If I donated a building to a university on the condition that they name the building after me, is that only a partial transfer since they can't dispose of the building however they like?
There's a good reason the law is in place. It prevents someone from donating the rent of a building they are unable to rent at market rates or sell as a scheme to make themselves money rather than being a true donation. However, Dr Bose's donation does seem like a true donation. He could keep the shares and not sell or donate them and then they'd be unrealized gains and untaxed. He's losing the dividend interest on those shares and so he is giving that up and MIT is benefiting from it.
I think this is more about legacy. It ensures that the majority of Bose shares will be held by MIT for all time. As such, the company can never face a hostile takeover. Likewise, it helps MIT which is an institution that he seems to care a good deal about - he received three degrees there and taught there for decades even as his business was successful. I'm not a lawyer and so it might run afoul of the letter of the law, but it doesn't look like a scheme in the way that many other non-full donations do look like schemes. This looks like a professor and founder trying to ensure the future of two institutions he loves.