Imagine: Mrs. Ruth Gottesman, widow of Mr. David “Sandy” Gottesman, donated US$1 billion of Berkshire Hathaway stock to Albert Einstein College of Medicine, a medical school in the Bronx, in New York, with nearly 1,300 students. Thanks to this donation, students will no longer have to pay tuition in perpetuity! According to the Wall Street Journal, the cost of Albert Einstein’s four-year program was nearly US$100,000 per year. Most students therefore finished their studies with substantial debt.
Mrs. Gottesman, aged 93, was a professor at the Albert Einstein School and sat on its board of directors. Mr. Gottesman died in 2022 at the age of 96. He was an early investor in Berkshire Hathaway and a close friend of Warren Buffett. It was these shares of Berkshire Hathaway that Mrs. Gottesman donated to Albert Einstein College of Medicine.
I am always amazed by such acts of generosity. Philanthropy has been well established in the United States for several generations. I particularly remember the exceptional donations made in the 20th century by giants of capitalism like Andrew Carnegie and J. Paul Getty. More recently, Michael Bloomberg donated $1.8 billion to Johns Hopkins University or Chuck Feeney gave most of his fortune to a foundation so that it could be distributed during his lifetime (I recommend the book The Billionaire Who Wasn’t, by Conor O’Clery, which I rated ★★★★★). The culture of philanthropy is indeed well established in the United States.
In Quebec, I believe that this culture of giving is still embryonic. I expect it to increase significantly over the coming decades thanks to the economic boom that we have experienced since the “Quiet Revolution”.
For many stock investors, like Mrs. Gottesman, an effective way to give is to donate stocks. Although there have been changes in the 2023 federal budget, donating shares remains a tax-attractive way of giving (before proceeding, I suggest you confirm with your accountant or tax professional).
It is indeed possible to donate company shares you own to charities of your choice (to my knowledge, most can accept such donations and resell them). The donor thus receives a tax receipt for the market value of the shares he donated. But, in doing so, the unrealized gain associated with the donated shares is not taxable. For those (like Mrs. Gottesman) who own stocks with high gains, this is a significant advantage!
In portfolio management, this mechanism can become an interesting tool, at least for those who wish to make donations. It makes it possible to reduce (or eliminate) one or more securities whose direct sale would cause a hefty tax bill.
The example of Mrs. Gottesman clearly demonstrates that the capitalist system can be a source of extraordinary personal enrichment. It can also be used to give back huge amounts of money to society. Well done, Mrs. Gottesman! I hope other investors will follow your example.
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Philippe Le Blanc’s Blog is published in
