Commentary: Buyouts bring opportunities for philanthropic legacies
With the impending purchase of Reynolds American by British American Tobacco, there are many in Winston-Salem who have an important decision to make: they can either cash out the appreciated stock while incurring significant capital gains taxes or donate their Reynolds stock (or a portion of it) to favorite charities and reduce their taxes at the same time. As they consider this opportunity, I think it might be helpful to hear an inspiring story that resulted from the RJR Nabisco buyout in 1989.
One of many remarkable results of that buyout was a gift made 11 years later to Winston-Salem’s community foundation from an amazing lady, Pauline Carter. Pauline started work at Reynolds Tobacco in 1926 at the age of 16, making $.10/hour as a cafeteria server. She worked all her life for Reynolds, ultimately working her way up to cafeteria manager, and she always bought as much preferred company stock as she could. Pauline was a saver, and she even kept a detailed handwritten journal for all of her Reynolds investments.
After Pauline’s death in 2000 and thanks to her substantial assets, the Sam N. Carter and Pauline H. Carter Fund was established at The Winston-Salem Foundation, ultimately leaving $2.85 million to support nonprofits in our community. Now, in 2017, both the value and the impact of charitable gifts from this fund are greater than Pauline could have ever imagined.
Thanks to investment returns over the past 16 years, her fund is currently at a higher value than where it began, and it has already cumulatively granted almost $2.1 million to community nonprofits. Since it is an endowment, her gifts will keep on supporting nonprofits in perpetuity. These charities include Ronald McDonald House, Family Services, Senior Services Meals on Wheels, Sunnyside Ministry, Centers for Exceptional Children, the James A. Gray High School Alumni Scholarship, Winston-Salem Preparatory Academy, Children’s Museum of Winston-Salem (now Kaleideum), and many others.
Countless lives have benefited from the gift that she made. From her humble beginnings, she has created a legacy for this community.
For Reynolds American shareholders, the same giving opportunity presents itself today. There can be a number of ways to receive a favorable tax advantage by gifting Reynolds American stock. Stock can be donated outright to any nonprofit – such as to a human services or arts organization, a church, university, or to a community foundation. Community foundations are unique in that endowments can be established in a donor’s name, as it was for Pauline, to support multiple organizations they care about – reaching far into the future – and they can even provide scholarships for local students.
As you can see, there are many ways to take advantage of this unique opportunity to support important causes while avoiding a large tax bill. It’s important to note that donors should be mindful of future shareholder deadlines and always check first with their tax or financial advisers to address their own unique financial situations.
Having known Pauline and followed her fund from its beginning, I have no doubt in my mind about the saying, “It is more blessed to give than to receive.” If Pauline were alive today to see the results of her generosity, I’m sure she would wholeheartedly agree.
Gene Hoots was an investment advisor in Winston-Salem for 20 years, before moving to Charlotte in 1996.