Wednesday, May 26, 2010

Sale of Pabst to Comply with Excess Business Holdings Rule

The Kalmanowitz Charitable Foundation has owned the Pabst Blue Ribbon Brewing Company for about 10 years and must sell the company.  Paul Kalmanovitz bought Pabst just two years before he died, in 1987. It appears (reading between the lines of the story in the Chicago Tribune and a blog post on the Milwaukee World - described below) that he gave the stock to his wife, Lydia, and ultimately, on her later death, either he or she gave the stock to the foundation.  Lydia died after Paul and the stock was distributed to the foundation in July 2000. 

The foundation did not sell the stock within five years of when it received the stock, as required by IRC § 4943(c)(6).  The foundation requested and received a five-year extension, as permitted by IRC § 4943(c)(7) which permits the IRS to grant an extension for an unusually large bequest, if the foundation had made diligent efforts to sell the stock within the first five-year period.  Now the extension period is expiring and the company has found a buyer, C. Dean Metropoulos.

Curious about the Kalmanowitz Charitable Foundation, I did a little google research.  The foundation does not appear to maintain a website (my internet research skills are limited so it could be there, but it didn't pop up quickly), and Guidestar did not have a recent 990-PF for the foundation.  I did find a blog posting with some interesting information. 

In 2006, Michael Horne blogged about the foundation on Milwaukee World (a political blog that focuses on Milwaukee) and then updated the post in July 2008.  The blog states Mr. Horne's suspicion that the foundation had grossly undervalued the stock.  The blog provides a link to the foundation's 2005 990-PF, which he had found on the Foundation Center website.  The 2005 filing shows an asset value of just under $2 million in 2000, increasing to a little over $6 million in 2003, and then to $32,350,680 in 2004.  Mr. Horne also reports that the estate of Lydia Kalmanovitz took a charitable deduction of $387.7 for transfers of stock and other estate assets to the foundation, and reports that the IRS challenged the amount of the charitable deduction in 1998.

The Chicago Tribune, which reports today on the sale of Pabst, does not talk about the foundation, except to say it owns the stock, but does note that the foundation will receive $250 million for the stock.  Perhaps the stock has appreciated dramatically in five years, but if so, that's a substantial increase in value!


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Here's the link to 990s-PF:

Posted by: jpe | Jun 2, 2010 12:22:29 PM

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