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II. Accepting Cash Gifts

A. Donation Receipting/ IRS Regulations | B. ECC Receipt Form | C. Restricted and Designated Gifts | D. Christmas and Special Gifts to the Pastor | E. Memorial Funds | F. Stock as a Charitable Gift | G. Real Estate as a Charitable Gift | H. Tangible Personal Property, Partnerships and Royalties as Charitable Gifts

INDEX
 

F. Stock As A Charitable Gift

Information helpful for church and/or ministry financial officers responsible for processing gifts of stock.

INTRODUCTION
Millions of Americans own stocks, bonds or other types of securities. When church members are made aware that the church welcomes gifts of securities, they will consider giving stocks and bonds as a means of furthering their Christian giving goals. Often members who have not completed their annual pledge find that by giving securities outright, they can give more without increasing the cost of giving. And your ministry need not be hesitant to accept gifts of marketable stocks or securities, so encourage your members and friends to use this method of giving.

Here's how a potential donor can decide if a stock gift is a good thing:
Securities that have increased in value are an excellent way to make a charitable gift. If the donor sold these securities, a taxable capital gain may be incurred. But the capital gains tax may be avoided by giving the securities outright. If securities have decreased in value, it is usually not good stewardship for a donor to make a charitable gift with securities which have decreased in value since acquired. In most cases, the better way to handle these gifts is for the donor to sell the stock and establish a capital loss. Then he/she can give the proceeds to the charity and take a charitable deduction.

Other ways to use gifts of stock include:
Bargain sales of securities - A donor can sell to the ministry, shares of marketable securities which are worth more than they originally cost at a price below the fair market value. The usual sale price is the donor's cost basis (what he/she originally paid). The gift is the difference between the sale price of the property to the ministry and the higher fair market value. Some, but not all, of the capital gain will need to be reported and taxed when the member sells such securities to the church at their original cost.

Giving securities for life income
It is possible to create irrevocable charitable trusts and fund them with appreciated securities. The trust can then provide for either fixed or variable distributions for the life of the donor and/or a loved one. This method of funding a deferred gift also has the benefit of allowing the donor to reduce or avoid capital gains tax by making a charitable gift. Another advantage of this type of arrangement is that, after the death of the donor, the residue goes to one or more charities of the donor's choice. The Office of Estate Planning Services can help with this type of arrangement.

How To Make A Gift Of Securities
The donor should: 1) Send or deliver the stock certificate directly to your ministry. If mailed, use registered mail. The donor should also provide a letter describing the stock and stating his/her intention to make a gift of it, and how the proceeds are to be distributed. 2) In a separate envelope, send a signed stock power form(s) [one for each issue of stock] to your ministry. If the donor is delivering the securities, the stock power forms may be delivered at the same time. If the shares are in a stock brokerage account or are mutual fund shares held by the mutual fund, the donor should arrange with his/her broker or mutual fund to transfer the shares to the charity.

We suggest using the stock power forms (available from any broker) rather than having the donor sign on the back of the stock certificate(s). Once the back of the certificate is signed, the stock is then negotiable. It is better security to have the certificate and stock power kept separate until actually delivered to the ministry's broker for disposition. If actual sales are not available during a reasonable period before and after the date of delivery, fair market value is the mean between bona fide "bid" and "asked" prices on the date of delivery.

Mutual fund shares - For gifts of shares in open-end investment companies, the fair market value is the redemption price ("bid") on the date of delivery. Closed-end investment company shares are valued the same way as securities traded on a stock exchange or over the counter (see above).

Receipting And Donor Tax Reporting Requirements
A donor must use IRS Form 8283 to report non-cash charitable gifts each year for which the charitable deduction totals more than $500. Depending on the type of property given, it may need to be signed by the charity that received the gift. You must provide a receipt for the donor which meets recent IRS requirements for receipting of charitable gifts. Remember to use the calculated fair market value of the stocks, not what appears on the ministry's broker confirmation slip. This usually means you will not be able to use a computer-generated receipt form, since that reflects the amount which was actually deposited to the ministry's account. A better method is to write an individual letter on the ministry's letterhead, using the following suggested format. Items in parentheses will change for each letter.

(date)
(donor name)
(donor address)
(donor city, state, zip)

Dear (donor name[s]):

We are pleased to acknowledge receipt from you of (Certificate #12345 for (90 shares of XYZ Corporation) common stock. This stock was received by (Ministry Name) on (Valuation Date). The per share range on that date was (24.75 to 25.25 [low to high]); and at a mean price of (25.00 [mean of high and low]), your gift has a value of ($2,250.00 [mean price multiplied by number of shares]). These shares represent a charitable gift, for which you have received solely intangible religious benefits and no goods or services in return. Your gift will be used for the general purposes of (Ministry Name).

We are grateful for your support and generous contribution, which will be used to sustain and support the ministries of (Ministry Name). Thank you for your gift.

Sincerely,
(Name)

For further information, contact the Office of Estate Planning Services at 800-483-2177.

(All material is presented for educational purposes only, and represents our current understanding based on information received from our tax and legal advisors. It is meant to provide information about the various personal, tax and economic benefits which may result from different estate planning and planned giving ideas. Because situations differ, it is important for you to have an estate plan specifically designed to fulfill your objectives. Nothing in this material is intended as legal, tax or investment advice. Laws and procedures are constantly changing, are subject to differing interpretations and may vary from state to state. if you require legal, tax or investment advice, you should consult a competent attorney, tax or investment advisor.)

HOW TO VALUE A GIFT OF SECURITIES FOR RECEIPTING

Establishing the 'delivery date'
Securities held in 'street name' by the donor's broker

If the shares are held in an account by the donor's broker (e.g. the donor does not have a stock certificate), this is called being held in 'street name'. Securities held in street name are normally 'wired' by the donor's broker to the charity's stockbroker or custodian. The delivery date is the date the securities are received by the charity's broker or custodian.

The donor's broker will often ask the charity to establish an account at the donor's brokerage firm, so that firm can sell the securities and receive the commission. In this case, the delivery date is the date the securities are actually transferred to the charity's new account.

If the securities are mutual fund shares held by the mutual fund and a share certificate has not been issued, the delivery date is the date the shares are transferred into the name of the charity by the mutual funds transfer agent.

Securities held in certificate form:

(Source: Outright Giving Tax Techniques by Conrad Teitell, Philanthropy Tax Institute)

Establishing the Value of the Securities

Regularly traded common stock - The fair market value for receipting to the donor is the mean between the highest and lowest quoted selling price on the date of delivery of the gift to the ministry, multiplied by the number of shares donated. (If the stock and stock power are delivered to the ministry on Monday, April 1; the high for that day is 25.00 and the low is 24.50. Assuming 100 shares were given, the amount receipted to the donor would be 24.75 (25.00 + 24.50 = 49.50 divided by 2 equals 24.75) times 100 or $2,475.00.) DO NOT USE THE AMOUNT SHOWN ON THE SALE CONFIRMATION YOUR MINISTRY RECEIVES FROM THE BROKER AT THE SALE OF THE STOCK.

Stocks not traded regularly - If there are no sales on the date of delivery, but there were sales on dates within a reasonable period both before and after the delivery, fair market value is a weighted average of the mean between the highest and lowest sales on the nearest trading dates before and after the date of delivery. The average is weighted inversely by the respective numbers of trading days between the selling dates and the date of delivery. (EXAMPLE: Donor delivers listed securities to charity on Saturday. Sales of stock nearest the delivery date occurred one trading day before (Friday) and one trading day after (Monday). The high on Friday was $11 and the low was $9 per share. The high on Monday was $13 and the low was $11 per share. Friday's mean is $10; Monday's mean is $12. $10 + $12 = $22 divided by 2 = $11 per share fair market value.