Entering gifts of securities (stocks) into LGL

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This article is intended to help you enter a proper gift value for a gift of securities (stock) your organization receives.

Background

Most often an organization has an established relationship with a financial institution, or stock broker, which receives the shares transferred from the donor to the organization. This is an essential part of the transaction because the donor will only receive full tax benefit of donating securities when they can transfer ownership of the stock to the non-profit organization. If your organization is telling donors to sell the stock first and send you the cash they receive, two scenarios are likely: a) your organization is receiving less money than the donor really wants to give you and b) your organization may appear unsophisticated and naive, which will not inspire confidence in donors.

Two main types of securities

  1. Publicly traded stocks. These are the securities your organization is most likely to receive as a gift. Easy examples of public companies with publicly traded stocks might be ExxonMobil or Apple.
  2. Privately traded securities. It is unlikely your organization’s broker/financial institution will accept privately traded securities on your behalf. Your organization should not accept privately traded securities at all without receiving very good legal/tax advice. To issue a tax receipt for privately traded securities, you will likely need a third-party appraiser and there are restrictions on the types of securities a non-profit can hold. Privately traded securities should be treated like someone wanting to donate their house to your organization: a very complex legal and tax situation.

Finding the value of a gift of publicly traded securities

The gift value of a gift of securities is the mean (average) of the highest and lowest quoted selling prices on the date of contribution. See this Wall Street Journal article for more info.

Step 1: Determine the date of contribution. The proper date is the date your organization’s broker received the stocks into your organization’s account. All of the following dates are irrelevant:

  • The date the donor called and said they were giving a gift of securities
  • The date your broker sold the securities
  • The date the check arrived from your broker reflecting the sale

Step 2: Look up on a public service ( Yahoo! Finance is one such place) and use the date of contribution to look up the high and low value for the securities given by your donor. For example, if a gift of 100 shares of Apple was given on June 1, 2014, you would look up the historical price (high and low prices) for Apple stock on June 1, 2014.

Step 3: Calculate the value of the stock gift. Take the high price and low price for the date of contribution and determine the mathematical mean (or average) of those two values. Multiply that value by the number of shares given, and you now have the proper value to enter into LGL and put in your gift acknowledgment (tax deduction) letter. We have provided a simple Excel sheet you can use to help you calculate this value. Simply complete the items in red, and your gift value will be reflected.

  • Stock Valuation Worksheet (Excel file)
  • NOTE: The amount of the check sent to your organization less their fees for selling the stock is not relevant to the value of the gift. This may require separate review during reconciliation as LGL will accurately reflect the gift value while the financial records of your organization will only be interested in the value of the check received.

Entering the gift into LGL

Follow standard gift entry procedures to enter a gift with an LGL gift type of “Gift” and choose an appropriate gift category (Securities of Stock, depending on how you set things up). In the Gift Note field, we suggest you type the number of shares and the stock name. When you choose an acknowledgment template, it is a good idea to have one developed specifically for gifts of securities. The following phraseology could be used in that acknowledgment letter:

  • Thank you for your gift of 100 shares of Apple on June 1, 2014. The value of that gift was $63,654 (based on the calculated mean of a high value of $644.17 and a low value of $628.90 on 6/1/14).

If you were to write your version of the above into each Gift Note field, you could design a template in LGL to simply pull the gift note field into your letter.

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