MIT Gets a Stake in Bose Stereo Maker
and Draws Many Questions About Gift
By Ben Gose
The Massachusetts Institute
of Technology might be expected to sing the praises of Amar
G. Bose, who last month provided the university with a majority stake in the famous high-end stereo maker Bose Corporation.
Instead, the university made
a quiet announcement on a
spring Friday and then hit the
mute button on discussions
about the gift.
The silence is piquing curiosity about what the gift is truly
worth. Experts say it is probably worth at least half a billion
dollars, but neither the donor
nor the university is saying, and
the unusual structure of the gift
may reduce its value.
Adding to the questions for
MIT: Some experts worry that
the gift might be similar to a series of tax dodges that Congress
investigated several years ago.
tions submitted by The Chronicle.
“Dr. Bose and Bose Corporation keep details of financial
matters confidential,” he said.
“MIT will honor that confidentiality and will not discuss the
financial details of this gift.“
Because it is a private company, Bose Corporation is not required to file public financial reports. A company spokeswoman
declined to answer questions or
make Mr. Bose available for an
The concerns about the gift’s
structure were first highlighted
last month in a New York Times
article, and university officials
have not provided any additional details about the gift since
then. Nathaniel W. Nickerson,
an MIT spokesman, declined to
answer a series of e-mail ques-
MIT said last month that Mr.
Bose, a graduate of the university who was also an engineering professor there for 45 years,
had donated nonvoting shares
in the company.
In a statement about the gift,
MIT noted that it had agreed
not to sell the shares or participate in the company’s management or governance. The university will receive cash dividends
from the company, it said.
Some experts wonder how
well the prohibition on selling
the Bose shares will hold up
over the long term.
Bryan K. Clontz, founder
of the Dechomai Foundation,
which helps charities receive,
manage, and sell complex non-
Business Owners May Consider
Donating More Gifts of Stocks
Will the donation of the Bose
Corporation to the Massachusetts Institute of Technology
start a trend?
It’s rare for a donor to give
away a majority share of a business, as Amar G. Bose, the
founder of the Bose Corporation, did last month with his
gift to MIT.
The process of donating a privately held business to a charity
can be messy—both for the donor and for the group receiving
the gift. But some experts say
such a gift can be a tax-savvy
move for a donor who has nurtured a business over decades
and has seen its value increase
Donors can often reap the
greatest tax benefit by giving away assets that have appreciated the most. In the late
1990s, when affluent investors
were sitting on hefty stock-mar-ket gains, it made sense to give
away stock, notes Bryan K.
Clontz, founder of the Dechomai
Foundation, which helps charities process complex noncash
donations, including business
Following a decade of small
gains in the stock market, fi-
nancial advisers should encour-
age clients to consider donat-
ing business interests instead,
he argues. “Whether it’s Bose
or some pipe-fitting company,
it’s the same thing,” Mr. Clontz
says. “Many of these companies
have gained in value and are
run by the ‘millionaires next
door’ who are active in their
community and very charitably
Charities should pay close attention to the legal structure of
the company a donor wants to
give. A C corporation, in which
the company is taxed separately from its owners, is the most
straightforward type of company to donate. Limited-liabil-ity corporations and S corporations are trickier—and charities
could end up paying tax on the
gains that the donor accumulated over the years.
Mr. Clontz says he once received a call from a university
that was surprised to learn it
had to pay $350,000 in tax on
donated S corporation shares
that were used to establish a
$1-million endowed faculty position. The university had to find
other money to cover the full
cost of the endowed chair.
“This is a big university that
should have known better,” Mr.
Clontz says. “It put mud in a lot
of faces.” —BEN GOSE
cash donations, including business interests, envisions a day
when the ban on selling runs up
against the university board’s
responsibility to manage MIT’s
What happens, he asks, if a
weak management team suc-
ceeds Mr. Bose at the company
and a suitor seeks to take over
the company? The board’s in-
vestment committee may try
to find an exit rather than be
remembered as the board that
“should have sold three years
ago, before Bose tanked.”
Owning a company “puts
charities in a different position
than they’re normally in,” Mr.
Clontz says. “They don’t have
both hands on the reins. It’s a
Dean Zerbe, a former Senate
aide who investigated potential
tax dodges as part of his Capitol
Hill job, said “the packaging” of
the Bose gift looks like transac-
tions that were banned by law-
makers in 2004.
Under the arrangements,
donors contributed nonvoting
shares to a charity, then after some time had elapsed, the
charity sold the shares back to
the company. The charity’s tax-exempt status eliminated some
of the levies that other shareholders of the company would
have been required to pay.
Mr. Zerbe, who is now managing director of the Alliant
Group, a tax consulting group,
said he does not think any such
deal had been made with the
Bose gift, but he said the public
has good reason to be skeptical
of any gift with unusual terms,
given that Mr. Bose may receive
a tax deduction and MIT, like
all universities, benefits from
many government subsidies.
“You really don’t know until
you rip off the paper and see
what’s inside,” Mr. Zerbe said.
“It’s disappointing that MIT is
not coming forward.”
Mr. Bose is one of America’s
wealthiest people. Forbes estimated his net worth at $1-bil-
lion in March, based primarily
on the value of his Bose Corporation holdings.
His Framingham, Mass., company had revenue of more than
$2-billion in 2010, according to
a spokeswoman. Many publicly
traded companies have a market value of at least as much as
their annual revenue, and Mr.
Clontz points out that Bose has
a strong brand. “I would assume it’s a very, very profitable
company,” Mr. Clontz says.
If Bose is worth at least as
much as its annual revenue, the
donation to MIT could be worth
more than $1-billion.
Jay Frost, a fund-raising consultant, notes that the cash flow
from dividends could be “
enormously valuable” to MIT.
Raymond G. and Ruth Perelman are longtime
supporters of the University of Pennsylvania.
U. of Penn. Medical School
How much: $225-million pledge
Gets $225-Million Pledge
Who gave it: Raymond G. Perelman, chairman of RGP
Holdings, a company with holdings in finance, manufacturing, and mining, and his wife, Ruth.
Who got it: University of Pennsylvania, to endow the newly
renamed Raymond and Ruth Perelman School of Medicine.
Purpose: The money is not earmarked for specific purposes, but officials of the Philadelphia school said it would help
them attract more top researchers and medical faculty and
enable the institution to provide medical students with more
How the gift came about: This is not the first gift the
couple has made to the university; they also gave $25-mil-
lion to the Ruth and Raymond Perelman Center for Advanced Medicine in 2005. Mr. Perelman, who is 93, graduated from the university’s Wharton School in 1940 and serves
on the medical school’s Board of Trustees. He said in an interview that the 2005 donation caused him to become much
more interested in medicine and health care.
Why the donors gave: Mr. Perelman cited his concerns
about America’s health-care system and the demands of the
new law to overhaul it, “They’re going to have to graduate
many more doctors,” he says. He said the financial-aid money will help many more qualified students pay for medical
school: “They’ll be better trained and will help more people.”
For details about other new gifts, including $50-million
to Children’s Hospital Los Angeles,
go to http://philanthropy.com/topdonors.
Send gift news to email@example.com.
“As long as a gift is in keeping with a charity’s policy and
the donor and the gift have
been properly vetted, then why
wouldn’t they consider receiving
it?” Mr. Frost says.
Restrictions on the Gift
Still, experts say the economic value of the gift will probably
be reduced by the restrictions
placed on it by Mr. Bose, including the nonvoting nature of the
“The fact that MIT can’t trade
the shares will have a negative
impact on the gift’s value and
will have a negative impact on
the size of the deduction Mr.
Bose takes,” says William Josephson, a lawyer in New York
who previously headed the New
York State Charities Bureau.
Federal tax law would prohib-
it Mr. Bose from receiving any
tax deduction if he had placed a
substantial block of his compa-
ny’s shares in a private founda-
tion, according to Mr. Josephson.
The concern is that an individu-
al might put company shares in
a private foundation in part to
maintain continued control over
a company and ward off an un-