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GiftLaw Pro Home   >  Chapter 5 - Difficult Property Gifts  >  5.3 Excess Business Holdings  >  5.3.2 Exceptions to Excess Business Holdings  >  Basic Quiz

Basic Quiz - 5.3.2 Exceptions to Excess Business Holdings

1. It is possible to transfer all of the C corporation stock in a family business to a charitable remainder trust (CRT) without triggering the excess business holdings rule if the stock is sold within five years.
           
2. Partnerships and LLCs are not subject to the excess business holdings (EBH) rule.
           
3. A CRT can hold all of the stock in a business interest that produces active income for a term of five years before the excess business holdings rule will apply.
           
4. Private foundations cannot use the five-year grace period.
           
5. If a business interest is gifted to a private foundation, the five-year exception does not apply and the 10% penalty tax is immediately imposed.
           
6. The five-year grace period begins to run on the date a buyer is found for the business.
           
7. At the end of the five-year grace period, the private foundation or CRT is subject to the 10% penalty tax if it has not divested itself of the excess business holdings interest and has not been granted an extension.
           
8. In her living trust, Daphne left her business, Scooby Snacks, Inc. to Mysterious Machines, an exempt private foundation. The foundation has held the property for five years and one day. If the foundation divests itself of the business interest anytime before the conclusion of year six, the excess business holdings rule will not apply.
           
9. A private foundation may request an extension of the five-year period to sell the business interest.
           
10. In order to receive an extension, the foundation or trustee must demonstrate that diligent efforts were made to sell the business interest at a reasonable price.