In operating our small private foundation, can we give away significantly appreciated stock to meet our annual distribution requirement without recognizing capital gain subject to foundation excise taxes?
Yes. The Tax Code Regulations make clear that a grant of appreciated stock by a private foundation does not trigger recognition of the gain. The amount of the grant counted toward the distribution requirement will be the fair market value of the stock given. If the stock were sold, the foundation would have to recognize the gain and pay the now 1.39% excise tax on the gain as part of its net investment income. It can save the tax by giving the stock. A public charity recipient will have no tax on gain when it sells the stock.