Soaring: Secure Donations of Appreciated Stock

By Laurence A. Pagnoni, MPA

The Stock Market is up. Asking for gifts of appreciated stock should be part of your year-end giving approach.

Start by letting your donors know that giving appreciated stock they’ve held for more than a year is better than giving cash. If they donate stock that has increased in value since it was first purchased it more than a year ago – and if they itemize deductions – they can take a charitable deduction for the stock’s fair market value on the day they give it to your organization.

However, let them know that a contribution of appreciated securities can yield two very different results depending on how they donate it. Donating securities directly to your charity to sell is cost- and tax-effective, while selling the securities and gifting the proceeds may minimize their savings.

The Math

Suppose you are a taxpayer with $500,000 of adjusted gross income and wish to contribute to charity. You own appreciated securities with a market value of $100,000 that you purchased for $10,000 more than one year ago.

Here are two options for donating appreciated securities.

  1. The capital gains tax is calculated by multiplying the $90,000 gain by the 20% long-term capital gain rate.
  2. The overall limitation on itemized deductions (the “Pease limitation”) reduces the deduction by $7,218. The 39.6% tax rate, therefore, applies to a deduction of $92,500.

Note: This is a simplified hypothetical situation for illustration purposes only. Please consult a tax advisor before donating appreciated securities.

Sample Template

Here’s a sample template to use at your website giving page, and within your donor letters:

—————————————————-

Donation of Stock

We welcome your gift of appreciated stock. Just have your broker transfer the stock to our account with XXXX.

Here are the account details:
Broker: XXXX
Account number: XXXX
DTC Number: XXXX
Our Phone #
Account Name: {Insert you agencies name.}
Nonprofit EIN#:

Please call XXX-XXX-XXXX or email XXX@.org so that we know the gift is coming and can ensure it gets processed properly.
—————————————————–

The Steps

If you have a donor who is willing to make a stock donation, then the following steps apply:

1. Open a brokerage account (if you don’t have one already). Research which brokerage firm is convenient and has the least fees.
2. Send the brokerage account information to the donor
Send the donor the correct stock transfer form
3. From the date the form is sent to the donor, to the date the stock is received by your non-profit, check their brokerage account for the stock to appear.
4. Prepare a receipt and figure out what the correct cost basis of the stock is.
5. Sell the stock and transfer the cash from the brokerage firm to your organizational bank account.

A final happy observation. Although stock gifts only make up about 1.25% of total donations, many times they tend to be major gifts worth over $10,000.

Happy year-end fundraising. Please let me know how your year-end giving efforts are going by posting on our blog.

Thank you!

www.lapafundraising.com

We welcome your comments about this post on the LAPA blog.

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