March 22, 2001 | Read Time: 1 minute
By ELIZABETH SCHWINN
Making an exception to its usual position, the Internal Revenue Service has told a taxpayer that he may deduct stock he gives to a nonprofit group as a charitable donation even though somebody else retains the right to vote as the shareholder, according to a recent private letter ruling (PLR 200108012).
The revenue service usually bars this kind of deduction, which it calls a “partial gift,” on the grounds that by giving shares of stock but not the power to vote them the taxpayer is not making a complete gift. But in this case it accepted the transaction because the voting agreement, known as a “pooling agreement,” was made eight years earlier and the donor was not trying to set up the arrangement as a condition of the gift.
Pooling agreements, whereby a number of shareholders give the right to vote their stock to a single party, are common in small, closely held businesses, where, for example, they might make it possible for those shareholders to control the selection of the board of directors.
