Gifts of stock and mutual fund shares are second cousins to one another. So you’d think the procedure to accept them would be the same, or almost the same.
Virtually all gifts of stock today are now conveyed from the donor to the charity electronically. On rare occasion the donor will want to donate actual paper stock certificates. There are specific procedures for that which we won’t go into today.
When the donor wants to give you stock, the two things they must know right away are; have they owned the stock for more than one year and has the stock appreciated in value?
Assuming both are true, the donor will tell her or his broker to transfer a specific number of shares of a specific stock to your organization. To do that, the donor needs seven pieces of information from you:
- The name of the brokerage firm that should receive the stock;
- The name of your representative;
- The rep’s phone number;
- The name of your account and the account number;
- Your DTC number; and,
- Your organization’s federal tax identification number.
You want to have this info on your website in a place where your donors can find it easily. Most often, under Planned Giving AND under Ways of Giving. And you want this info in a place where YOU and your team can find it easily – when the donor calls!
You want to remind your donors, often, that if they are planning to make a gift of stock to you, to let you know ahead of time so you can let your broker know! Otherwise, when the gift is made, the broker may not know who the stock came from and you can have a very difficult time finding that out in order to credit the gift and acknowledge the donor.
When your broker calls to tell you a gift of stock has been received, you want to know five things:
- The name of the stock;
- The number of shares received;
- The date the shares were received into your account; and,
- The high and the low price for that stock on that date.
When you acknowledge the gift to the donor, other than the obvious of thanking them in a genuine and sincere way, here is what you need to say:
“On (this date) we received your gift of # shares of (name of stock).”
If you choose to do so, you can tell the donor the high and the low price, and the median price, of that stock on the date you received it. That is how you will value the gift, the number of shares times the median price per share.
Here is the mistake virtually every organization makes:
“So the value of your gift to us is $_____.”
The IRS does not want nonprofit organizations to do that! Here’s why:
When the donor makes a gift of stock to you, or a gift of mutual fund shares for that matter, they are making a GIFT IN KIND. Just like if they were to give you paving stones or a coin collection.
The IRS says that the nonprofit organization is not permitted to assign a value to the gift in kind. That’s the responsibility of the donor.
In other cases, the donor is required to obtain, at their expense, an independent appraisal of the item(s) donated and this is the value they use to report the gift.
When a gift of stock is made, the donor’s broker will tell the donor the high and the low price of the stock on THE DATE THE STOCK LEFT THE DONOR’S ACCOUNT.
Because the value of the stock may have changed between when it left the donor’s account and when it was received into your account (say, over a weekend), the value you give the gift and the value of the gift to the donor may be different!
It is really, really important to understand the rules, to let your broker know (don’t ever assume they know because they probably don’t) and to let the donor know.
Make sure the donor knows that you must, by law, follow the IRS rules for valuing a gift of appreciated securities. You are not allowed to tell them the dollar value of a gift of stock. You can say, if need be, what your organization will value the gift to be, but you must tell the donor they need to obtain the value of the gift from their broker.
Tomorrow: How gifts of mutual fund shares work.
Have a good day, my friends.
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