narayan
There’s so much negativity in the news today that it’s easy to take a dystopian view of the future. But I take a more utopian view. There are many new businesses, technologies and opportunities that will revolutionize hundreds of industries for the better in the long term, making it hard to keep track of them all. And it’s happening faster than ever before.
After years of sluggish activity, the initial public offering market has been on fire lately. With 127 filings in Q1 2026 alone, it’s been the third-highest IPO quarter in three years. This activity has been driven by normalizing interest rates, turmoil in private capital markets, venture funds reaching liquidity timelines and a massive backlog of AI-driven private “unicorns” needing more cash to support their grand ambitions.
That means there will be more opportunities for huge stock appreciation when some of the large, privately held tech and AI “unicorn” companies go public—for instance, SpaceX, Anthropic, OpenAI, Stripe and Databricks. These five companies alone have roughly 50,000 highly compensated people, combined with billions of dollars’ worth of low-basis, highly appreciated stock. Chances are, you have clients or clients’ adult children who work for such companies. Many will be receiving a windfall but will also face tax challenges they’re not accustomed to.
Make sure they don’t overlook tax-efficient charitable giving strategies.
At these privately held unicorns, company insiders generally can’t transfer their shares to others, including charity. But once they go public, they can cash out or transfer their shares to a trust, including a charitable trust. (Note: Special rules apply to “insiders”).
Sure, they can do option-exercise financing or sell-to-cover financing to help them pay their newly inflated tax bill. But there’s a more efficient and more satisfying way – charitable giving.
Beyond DAFs
While a donor-advised fund may provide the largest possible charitable deduction and avoid all capital gains tax, the money has essentially been given away and will provide no other benefits to the donor or their family. There are other solutions.
Older clients can put their money in a charitable remainder trust (CRT) but a CRT won’t work well for younger clients due to the minimum 10% remainder interest test and the minimum 5% payout rate. Because of these limits, younger donors can’t make the math work for a CRT to be “qualified.” Instead, they can put their money into a pooled income fund (PIF), because with PIF, there’s no 10% remainder interest and no minimum payout rate. You can even do a PIF for a child.
Like CRTs, PIFs pay out income to the donors, typically for their lifetimes, but they generally provide larger income tax deductions. We have one client with a multigenerational PIF, and the fourth generation is only one year old. Sure, you can do a CRT for a “term of years,” but the term is limited to 20 years. If your client is 25, they don’t want a CRT that will expire at age 45.
Another option is a charitable lead trust (CLT). A CLT is the opposite of a CRT. Your client makes a donation, and the charity receives the income for the remainder of your client’s life. At the end of their life, any assets remaining in the trust are passed to beneficiaries. This technique can reduce estate and gift tax in certain situations. Some CLTs can run for a period of years and be structured so the balance returns to the donor.
NOTE: CLTs don’t avoid capital gains tax because they aren’t tax-exempt. If a client has already sold stock and needs an offsetting charitable deduction, however, a CLT is often a good choice
Whether your client is an executive, employee or early investor in a company going public, they have the opportunity to offset their tax burden in a high-income year when they give a portion of their appreciated shares directly to a public charity.
Donating long-term, highly appreciated stock is an underutilized strategy that your newly wealthy clients can deploy to minimize capital gains taxes owed on any appreciation and to qualify for an immediate income tax deduction for the value of their gift. It’s also a great way to introduce them to strategic, planned giving at an early age – a habit they’ll hopefully continue as they get older to make an impact with their wealth. I know, I’m an eternal optimist!
Again, make sure your client isn’t an “affiliate” of the company, that is, a director, executive officer or shareholder holding more than 10% of the company’s stock. They have different considerations for gifting their shares, which I’ll discuss in a future article. Determining affiliate status is pretty simple, but it gets tricky when looking at “alter egos” of the affiliate (such as relatives living in the affiliate’s home or trusts controlled by the affiliate).
Gift Shares Directly to Charity
If your client sells their long-term appreciated stock and then donates the net cash, they’re subject to capital gains tax, which can be 23.8% at the federal level alone for high earners. Instead, if they donate the stock directly to a public charity, they may minimize capital gains tax and become eligible for an immediate income tax deduction.
When your clients donate publicly traded stock that they’ve held for more than one year, they can generally deduct the full fair market value of the securities on the date of the gift, rather than their original cost basis.
Deductions for donations of appreciated stock are generally limited to 30% of the donor’s adjusted gross income (AGI), compared to the 60% AGI limit for cash donations. Any excess, however, can be carried forward for up to five additional tax years.
Research shows that entrepreneurs exhibit greater philanthropic behaviors post-IPO than non-entrepreneurs who experience the same creating event.
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