In addition to the many philanthropic reasons a donor might have for establishing a private foundation, there are also short-term and long-term tax benefits to consider. A donor may be able to take advantage of four main tax benefits when he or she gives to a private foundation:
- Reducing the donor’s income tax for each year in which a contribution is made.
- Income-tax-free growth of assets which have been contributed to the foundation.
- Avoiding capital gains taxes depending on the characteristics of property contributed.
- Reducing or eliminating potential estate taxes.
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