Soaring: Secure Donations of Appreciated Stock

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.

1The capital gains tax is calculated by multiplying the $90,000 gain by the 20% long-term capital gain rate.

2The 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

Related Posts

Foundations Aren’t Much Interested in You

“America’s foundations are not particularly interested in receiving your proposal.” – Bradford K. Smith, President of Candid

Grateful for Brad Smith’s candor and leadership over the years, I rang him up for a chat. Initially, I wanted to know if what our grant officers suspected was in fact true—that most foundations do not welcome your proposals.

Read More »

Virtual Parties With A Purpose: A Compliment to Large Galas

Do you want to throw small virtual fundraising events? If so, this blog post is for you. Big galas have their place, but smaller online events can be impressively lucrative when done well. Sometimes called “Parlor Gatherings,” we call them “Parties with a Purpose” (PWAP). These events can complement your large gala—or even be held in lieu of it.

Read More »

Your Questions, Our Answers on Starting Over with Individual Donors

The questions below were asked by attendees at our “Starting Over” webinar of April 21, 2021, presented by Roger Craver & Laurence A. Pagnoni.

The questions are fascinating, and we hope you’ll find our answers equally so. The webinar focused on the new rules of individual giving fundraising. We welcome your input as well by posting on our blog.

Read More »

Let Your Donors Know – 2021 Tax Incentives

Here are SPECIAL 2021 TAX INCENTIVES FOR GIVING for you to let your donors know. Congress has provided several economic incentives to help address the far-reaching effects of the COVID-19 pandemic, including additional tax incentives to encourage charitable giving. These incentives are temporary and are scheduled to expire at the end of 2021.

Read More »