Wednesday, March 05, 2008

It's Not The Gift; It's The Thought That Counts

That's usually the case with people. Not necessarily true when corporate executives give gifts of stock to family foundations.
Top corporate executives often make large gifts of their company’s stock to their family foundations shortly before the stock price drops sharply, according to a new study by a New York University professor. As a result, the executives are able to claim the maximum possible tax deduction and escape capital gains taxes.

The research by David L. Yermack, a professor of finance at the Stern School of Business at New York University, also found patterns to suggest that some gifts of stock might have been backdated to enhance their value, in much the same way that some companies backdated stock options.

“On average, the gifts have been extraordinarily well-timed to maximize the associated personal income tax benefits,” Dr. Yermack said in an interview on Tuesday, “and it seems to me fairly likely that some of these people making them may be monkeying around with paper trails.”

Very convenient isn't it?

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