GPC Winter Newsletter 2025

Good Tidings of Great Joy!

David Smith, Donor Liaison, Gift Planning Services, Philanthropies

Merry Christmas!

I bring you good tidings of great joy, which shall be to all people.
For unto you is born this day in the city of David a Saviour, which is Christ the Lord.

I don’t remember when it was that I became more focused on the giving aspect of Christmas rather than receiving. I’d like to think it was when I was a teenager, but I think it was more on my mission, when it didn’t concern me as much what my parents sent me, but that they loved me and that the gift I was giving was my heartfelt efforts to serve. It became more important to me when I married and started a family—it became obvious to me how happy it made me to give to others and make them happy. Elder Kearon spoke about that in a recent general conference talk. We get to see the joy of giving in our work at Philanthropies. We know the joy that the recipients receive, but at Philanthropies we emphasize that giving blesses the benefactor also. We hope in your professions that you see these blessings as you participate in the giving process with your client—beyond the transactions—and experience the joy of giving.

Our recent Gift Planning Council Conference (GPCC) was one of our most memorable gatherings yet. This was the fifth conference I have been blessed to help organize, and it was perhaps the most memorable for me. This has been one of the most rewarding experiences of my career, and that is largely due to each of you who are vital to the fabric of a beautiful gathering of professionals and friends who seek to bring goodness and light to our world. Thank you for being who you are, and for lifting where you stand.

Merry Christmas to you and your families. We are grateful for you!

Walk of the Unwary

Martin J. Hanifin, J.D., Gift Planning Specialist, Gift Planning Services, Philanthropies

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“The problem in America isn’t so much what people don’t know; the problem is what people think they know that just ain’t so.” Will Rogers (humorist and apparently part-time tax and estate planner)

When the Tax Court issued its opinion in Estate of Hoensheid v. Commissioner¹ on March 15, 2023, donors and their professional advisors were reminded of the severe tax consequences that can happen when a charitable gift of appreciated shares of a closely held corporation being sold is deemed to have been made too late to avoid reportable capital gain income to the donor. In Hoensheid, the Court found that the sale was a virtual certainty by the time the donor transferred the property to the donee. As discussed below, the donor was found to have tripped over the doctrine of anticipatory assignment of income, and the donor was unable to avoid taxation on the significant capital gain associated with the donated shares. The Court also determined that the donor in Hoensheid failed to have a qualified appraisal, resulting in the donor also being denied the benefit of a charitable contribution deduction.² For this double whammy, Hoensheid deserves a place on donor and practitioner Top Ten Lists of “Things to Do Better Next Time.”³

The central issue before the Court in Hoensheid was the timing and sequence of events surrounding the underlying sale of a closely held corporation and the donation of a large block of shares by one of the principal shareholders to a donor-advised fund. In maintaining control of the shares and not completing the gift of shares to the donor-advised fund until after the donor was “99% certain” that the sale of the corporation would go through, the donor learned what some of us learned from our grandparents when they counseled that we were at times trying to be too cute by half.

It is easy to understand the competing motivations that led to the undoing of the donor in Hoensheid. On the tax-planning side, the donor wished to enjoy the well-known and twofold advantages of donating appreciated assets. First, the donor sought to avoid capital gain on the unrealized appreciation of the donated property (in this case a large block of closely held shares). Second, the donor sought the significant charitable contribution deduction equal to the property’s fair market value at the time of gift.⁴

The Court in Hoensheid did a masterful job recounting the entities, individuals, and the overall multi-ringed events that occurred between early April 2015 and July 15, 2015, when the sale of the underlying corporation was formally and finally completed.⁵ Significantly, the Court concluded that the charitable donation of shares occurred on July 13, 2015 -- only two days before the final sale. The Court reached this conclusion notwithstanding the donor’s efforts to assign the date of gift as June 11, 2015.⁶ The Court settled on July 13th because that was the day when the charitable donee received the stock certificate (with much evidence that the donor had maintained control of the certificate and its (non)release to the charitable donee prior to that date).

In the days and months preceding the final sale, the sale and its structure had taken firm shape. But several events in early July – all prior to the transfer of shares to the donee on July 13th – stood out in coloring the Court’s analysis:

• No donor-advised fund in place. As of July 10, 2015, Scott Hoensheid had not yet created a giving account with the donor-advised sponsor. Mr. Hoensheid finally established the donor-advised fund account during the day of July 10th, but no shares were transferred to the account.
• Sweeping Distribution of CSTC Working Capital. CSTC amended its corporate bonus plan and put into action its plan to dramatically draw down and distribute CSTC working capital as bonus payments to employees and distributions/payments to the Hoensheid brothers as shareholders. Between July 10th and July 14th, CSTC paid out $6.1M in employee bonuses and $4.7M to the Hoensheid brothers. The Court viewed these cash sweeps of more than $10M as a condition precedent to the signing of the formal sale of CSTC on July 15th.⁷
• Amended Articles of Incorporation. In early July, at the request of the purchasing private equity firm, CSTC filed amended Articles of Incorporation with the State of Michigan. In anticipation of the impending sale, CSTC also incorporated a new holding company subsidiary (CSTC Holdings) to acquire the CSTC shares; and,
• Draft Minority Stock Purchase Agreement sent to Donor-Advised Fund Sponsor. A Minority Stock Purchase Agreement was desired by the private equity firm in connection with its purchase of CSTC. The private equity firm understandably wished to know that its purchase of the shares donated to the donor-advised fund by Scott Hoensheid would be sold to the private equity firm.⁸

Anticipatory Assignment of Income: Under federal income tax law, gross income is taxed to the person who earns it or to the owner of property that generates the income. Under the assignment of income doctrine, a taxpayer may not avoid tax by assigning the right to income to another. In the context of a business sale, the prevailing analysis is whether the sale of the business has ripened to the point that the gains associated with the sale are a “practical certainty” and therefore cannot be transferred to another for tax purposes.⁹ Starting with Lucas v. Earl (income tax cannot be escaped by anticipatory arrangements of income, however skillfully devised)¹⁰ and its progeny of cases [e.g. Helvering v. Horst (income is taxed to those who earn or otherwise create the right to receive it)¹¹], the doctrine of anticipatory assignment of income has consistently been relied upon in both the income and charitable donation settings to state that a taxpayer or donor cannot escape tax liability on income that is essentially earned and about to be paid, even if the taxpayer or donor donates the property generating the anticipated income to another.

To avoid the anticipatory assignment of income doctrine, a transferor must have relinquished all control over the property before the anticipated income or income-triggering event is fixed. In the charitable setting, the donor must complete the donation of the property before the gain has “ripened.”¹² In reviewing the sequence of events before it in Hoensheid, the Tax Court concluded that by the time the donor transferred the shares on July 13, 2015, the donated shares of CSTC (through the actions of the donor and other owners/directors of CSTC) were no longer an interest in a viable corporation, but were instead “hollow receptacles” for conveying the proceeds of the sale of CSTC to the private equity firm. The Court applied the anticipatory assignment of income doctrine to attribute the capital gain on the appreciated CSTC shares to the donor.

Importance of Qualified Appraisal (To Include a Qualified Appraiser):
Compounding the outcome for the donor in Hoensheid, the Court also found that the donor failed to satisfy the qualified appraisal requirements found in §170(f)(11) of the Tax Code. The appraisal suffered serial deficiencies, including no signature, the lack of any description of the appraiser’s qualifications, no description of the method used for valuation, an incorrect date for the date of donation, and a failure to state in the appraisal that it was prepared for tax purposes (as required under 26 CFR §1.170A-17).

In Hoensheid, the donor used an appraiser with no experience performing an appraisal for the purpose of substantiating the charitable donation of closely held stock. Interestingly (although not listed by the Court as a cause for disqualification), the appraiser used by the donor had been involved upstream in the development of the sale transaction and had received compensation for services in that role. The donor presumably selected the appraiser because the appraiser was willing to provide the appraisal at no added cost to the donor. The Court observed that the donor had received a quote from an independent and experienced accounting firm, but elected to go with the appraisal provided by an individual who again had no experience performing such an appraisal and who had been involved in the development of the transaction.

The donor did not dispute that the appraisal had defects. The donor instead attempted to rely on the doctrine of substantial compliance, which states that an appraisal will not be disallowed if it substantially complies with the requirements to an extent that still allows the IRS Commissioner to evaluate the reliability and accuracy of a valuation. The IRS argued that the appraisal’s lengthy list of defects should remove the doctrine of substantial compliance. The Court agreed, finding the appraiser’s qualifications so lacking and the content of the appraisal so deficient as to render the doctrine inapplicable.

In one last attempt to salvage the significant charitable contribution deduction for the appreciated shares that had been donated to the donor-advised fund, the donor invoked the reasonable cause exception. The reasonable cause exception provides that taxpayers who fail to comply with the qualified appraisal requirements may still be entitled to a charitable contribution deduction if they can show that their noncompliance was due to reasonable cause and not willful neglect.¹³

The Court denied the donor use of the reasonable cause exception because it found the donor to be an experienced and sophisticated businessman. The donor chose an individual to perform the appraisal who had been involved in the transaction upstream and offered to conduct the appraisal at no cost. The donor chose not to engage the national accounting firm from which he had received a quote to perform the appraisal. The Court did not look favorably on the donor’s contention that he relied on others for the appraisal — particularly as the donor knew or should have known that the shares were not contributed to the donor-advised fund on June 11th – the date clearly listed in the appraisal he submitted with his taxes.

Takeaway Lessons from Hoensheid:

1. The Perils of Maximizing Advantage. The donor in Hoensheid knew well upstream that he wished to utilize a donor-advised fund as a method to avoid capital gain income and to realize a charitable contribution deduction. His attorney cautioned about the risk of transferring the shares too late for tax purposes. But as revealed in email and other statements of the donor, the donor wanted to maintain control until he was “99% certain” the sale would go through.
2. The Tax Court Will Treat Your Right Hand as Knowing What Your Left Hand is Doing. Even as the donor delayed finalizing the number of shares he wished to donate to his donor-advised fund, and even as he delayed releasing control of the stock certificate to the donor-advised fund sponsor until just two days before the sale closing, the donor was also intimately involved in the agreements and other upstream actions between CSTC and the private equity firm to satisfy any substantive contingencies to the sale. By the time the donor transferred the shares, he knew the transaction was settled.
3. His involvement prior to the transfer of the shares to approve plans to deplete and distribute CSTC working capital further informed the Court’s ruling.
4. Penny Wise-Dollar Poor. This one is a bit unfair, as the donor in Hoensheid certainly had paid professionals around him who were involved in the details of the transaction. These professionals were aware or should have been aware of the legal landscape and tax law appraisal substantiation requirements. But the record also reveals a donor who called the shots. The delay in donating the shares in a setting in which a successful sale was impending, compounded by the selection of an insufficiently qualified appraiser who failed to produce a qualified appraisal, cost the donor both the avoidance of capital gain income and a large charitable contribution deduction.
5. Proceed with Care. In declining to establish a bright line in terms of when a sale has ripened too much to avoid the assignment of capital gain to the donor of an appreciated asset, the Tax Court in Hoensheid honored longstanding judicial tradition. But the practical takeaway of Hoensheid is that discretion in this area of law is indeed the better part of valor, and the maxim the sooner the better has worthy value when determining when to effect a donation of closely held shares on the eve of sale. Post Hoensheid, in terms of how close to sale a transfer can occur without having the gain attributed to the donor, the working line remains a “reasonable probability”¹⁴ of sale/income and clearly short of “practical certainty.”¹⁵ The action by CSTC to adopt and act on what amounted to a liquidation plan prior to the stock donation certainly played into the Court’s decision.

¹ Estate of Scott M. Hoensheid v. Commissioner, T.C. Memo 2023-2024 The underlying corporation in Hoensheid was Commercial Steel Treating Corporation (CSTC). CSTC was founded in 1927 by Ralph Hoensheid and other family members. At the time of its sale to a private equity firm in 2015, CSTC remained in the Hoensheid family, equally owned by three grandchildren of Ralph Hoensheid (Scott Hoensheid and his two brothers, Craig and Kurt).

² As discussed infra, the deficiencies of the donor’s appraisal went both to the content of the appraiser and the qualifications of the appraiser.

³ The taypayer in Hoensheid was assessed a tax deficiency of $647,489 owing to the unreported capital gain income. The IRS also sought a penalty of $129,498, but the Tax Court was removed. The taxpayer also lost the claimed charitable contribution deduction of more than $3M.

⁴ Depending on the nature of the property donated, the charitable contribution deduction is equal to the fair market value of the property at the time of donation or the donor’s cost basis in the property.

⁵ The events leading to the sale of CSTC began in the fall of 2014, when one of the three Hoensheid brothers (not Scott) announced his intention to retire. By early 2015, an investment banking firm was retained to help sell CSTC, resulting in the submission of a letter of intent to acquire CSTC by a private equity firm on April 1, 2015. In mid-April 2015, Hoensheid began a discussion with his wealth advisors and his tax and estate attorney about making a presale charitable donation of CSTC stock to a donor-advised fund. On April 16, 2015, Mr. Hoensheid’s tax and estate attorney notified an attorney at the law firm partnering with CSTC in its planned acquisition that Mr. Hoensheid was considering donating CSTC stock to charity and that any such donation would need to occur before any definitive sale agreement was in place. During this April 2015 period, Mr. Hoensheid sent an email to his tax and estate attorney in which he expressed that he and his wife wanted to put stock approximating $3.5M in the donor-advised fund, but that he wanted to wait as long as possible to pull the trigger on the donation in case the sale of CSTC did not go through.

⁶ On June 11, 2015, CSTC held its annual shareholder meeting. Scott Hoensheid and his two brothers unanimously approved the petition to ratify the sale of all outstanding stock of CSTC to the private equity firm. Also approved at this June 11th meeting was Scott’s request to be able to transfer an unspecified portion of his CSTC stock to a donor-advised fund. Immediately following the annual shareholder meeting of the three Hoensheid brothers, a meeting of the full CSTC board of directors took place, at which the directors also unanimously approved Scott’s request to transfer an unspecified portion of his CSTC shares to a donor-advised fund. While it was clear to all involved that Scott intended to donate a block of shares, Scott neither finalized the number of shares nor released the stock certificate to the charitable donee until the second week of July. On June 12, 2015, the private equity firm unanimously approved the acquisition of CSTC, subject to a due diligence review that was completed June 30, 2015.

⁷ In the words of the Court, the dramatic distribution of more than $10M CSTC working capital prior to its sale on the 15th rendered the CSTC shares as merely “hollow receptacles” for conveying proceeds of the sale to the private equity firm.

⁸ The donor-advised fund sponsor communicated on July 13th that it would not sign the Minority Stock Purchase Agreement until it received the stock certificate. The stock certificate was (finally) provided to the donor-advised fund later the same day. The donor-advised fund sponsor did not sign the Minority Stock Purchase Agreement under warranty of good title until July 13th, once the stock certificate had been received.

⁹ See Jones v. United States, 531 F.2d 1343, 1346 (6th Cir. 1976) (whether the gain triggering transaction was “practically certain to be completed despite the remote and hypothetical possibility of abandonment”).

¹⁰ Lucas v. Earl, 281 U.S. 111 (1930)(Justice Holmes ended his opinion with his oft-quoted fruit-and-tree metaphor that has come to stand for the principle that (ripened) fruit cannot be attributed to a different tree than that on which it grew).

¹¹ Helvering v. Horst, 311 U.S. 112 (1940).

¹² See Ferguson v. Commissioner, 174 F.3d 997 (9th Cir. 1999); Jones v. United States, 531 F.2d 1343, 1346 (6th Cir. 1976)(to determine whether a right has “ripened” for tax purposes, a court must consider the realities and substance of events to determine whether the receipt of income was practically certain to occur); Kinsey v. Commissioner, 477 F.2d 1058, 1063 (2d Cir. 1973). For origins of tree-fruit metaphor and subsequent reference to “ripening,” see Note 10, supra.

¹³ 26 U.S. Code §170(f)(11)(A)(ii)(II)

¹⁴ See S.C. Johnson & Son, Inc. v. Commissioner, 63 T.C. 778, 782 (1975).

¹⁵ See Kinsey v. Commissioner, 477 F.2d 1058, 1059 (2d Cir. 1973) (corporation adopted a plan of liquidation prior to contributing its stock to a charitable organization).

A Look Back: GPC Conference 2025

The 2025 Gift Planning Council Conference (GPCC) was a marvelous gathering. Held November 13-14, 2025, at the storied Church Office Building in Salt Lake City, UT, this GPCC was our best attended yet.  We are very grateful for the 340 friends who joined us in-person or virtually. We sincerely hope it was educational and uplifting for each of you. We are pleased to share our 2025 GPCC webpage, which includes videos and slide decks from many of these presentations. We hope this proves to be a valuable resource to you all, whether you attended or hope to attend in the future. Feel free to share this content with other colleagues and clients or donors. If any wish to be added to our Gift Planning Council correspondence, they can easily let us know here. We look forward to seeing you at a future GPCC.

Every presenter contributed immensely to the tenor of the event. We were inspired by Elder Patrick Kearon from The Quorum of the Twelve Apostles. In a recent General Conference address, Elder Kearon taught us about gift giving and added to it through his remarks to us at Friday’s lunch. Fittingly, his being with us was the greatest gift we could have enjoyed at the GPCC.

Bishop L. Todd Budge of the Presiding Bishopric gave us a tremendous view of all the good happened in The Church of Jesus Christ of Latter-day Saints, showing us how closely intertwined the temporal and spiritual are.  It was impossible to not feel of President Alvin Meredith’s passion for BYU – Idaho, and to be astounded at all that is happening at this amazing university. The Spirit of Ricks is palpable. 

We reveled in learning more about the Salt Lake Temple and the upcoming Temple Square Open House in 2027, thanks to Charles Andersen. This will be a historical hinge point in so many ways. Tanise Chung-Hoon, our managing director here at Philanthropies, helped us further see that building the Kingdom of God is the greatest cause there is. It was a highlight to learn of Jason and Debbie Johnson’s philanthropic journey and what inspires people to be charitable.

Thank you to our esteemed technical speakers Marty Shenkman (religion and estate planning; gift planning developments), Eva Witesman (nonprofit insights for donors and advisors), Trevor Whiting (tax and legislative updates), Marcus Johnson (stewardship in planning), Alyssa Depew (business exit strategies), and Karin Hardy (charitable trusteeship and ethics). They enlightened us with timely information about a wealth of topics that sharpened our blades and expanded our perspectives.

BYU–Hawaii

IWORK at BYU–Hawaii

IWORK is a comprehensive work-study scholarship program that allows students to pay what they can afford, work part-time, and receive financial assistance to make up the difference. IWORK gives students from the humblest circumstances a chance to receive an education while learning self-reliance and preparing for their future.

A student participating in IWORK is required to work for 19 hours a week at BYU–Hawaii or the Polynesian Cultural Center. A portion of this income goes toward their tuition. An additional annual contribution, determined by individual financial assessment, is provided by the student and their family. The remaining cost of tuition, health insurance, housing, and meal plans is covered by funds from donors and BYU–Hawaii.

With an emphasis on students from Oceania and the Asian Rim, IWORK enables students to graduate without debt and to serve and lead in their families, communities, chosen fields, and stakes of Zion throughout Asia and the Pacific.

To learn more about BYU–Hawaii, the IWORK Initiative, and how donors can further this great work, click ​here​.

Informational Videos

We have created numerous informational videos that can be used easily to introduce and even educate individuals about segments of gift planning. They are easily available in the Gift Planning section of the Philanthropies website. One example is the following:

Donor Advised Funds

This video gives you a one minute guide to how Donor Advised Funds work.

To see the list of available videos, click ​here​.

PS: Don’t forget to add ​giftplanning@ChurchofJesusChrist.org​ to your safe senders list.

PPS: If you have friends or colleagues who you think would benefit from receiving this newsletter or other Gift Planning Council correspondence, please contact Ed Knight at ​edwin.knight@ChurchofJesusChrist.org​ or 801-356-5247.