

Gift to M.I.T. from Bose Founder Raises Tax Questions - snissn
http://www.nytimes.com/2011/04/30/business/30bose.html

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mdasen
I think that what Dr Bose has done is less about denying MIT the full donation
and more about keeping control of his company and making his gift a perpetual
one.

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.

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hootx
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.

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Shamiq
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.

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savramescu
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.

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rprasad
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.

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palish
_"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...

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ianthiel
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.

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tokenadult
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.

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grandalf
Oh the horror if the government doesn't get its cut and perhaps we have to end
one of the wars early.

~~~
wikyd
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.

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chernevik
I think you've got some variant of Stockholm Syndrome.

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maeon3
Brilliant, a gift with a fishhook in it that makes the survival of Bose's in
MIT's interest.

