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Author: katinga Big funky green star, 20000 posts Old School Fool Ticker Guide Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 120816  
Subject: Transferring stocks to a charity after ex div Date: 1/2/2014 6:06 PM
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OK. Here's a weird situation.

ROIC went ex div on December 12.

I transferred ROIC shares to a charity on December 13.

The dividend was paid to the charity.

I called Schwab on this. They checked and verified that apparently the transfer date and not the ex date applies to share transfers. I guess the dividend accrues to the shares and not the owner of the shares, or something.

So my questions are:

1. Really?
2. If this is the case, do I get credit for donating the dividend as well as the shares?
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Author: TMFPMarti Big funky green star, 20000 posts Home Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 119784 of 120816
Subject: Re: Transferring stocks to a charity after ex di Date: 1/2/2014 6:22 PM
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I transferred ROIC shares to a charity on December 13.

The dividend was paid to the charity.

I called Schwab on this. They checked and verified that apparently the transfer date and not the ex date applies to share transfers. I guess the dividend accrues to the shares and not the owner of the shares, or something.

So my questions are:

1. Really?


Beats me.

2. If this is the case, do I get credit for donating the dividend as well as the shares?

Only if the dividend is erroneously included in your income on the 1099-DIV and you include it as income on your return. The special treatment of donated securities applies only to long-term cap gains. Pub 526.

Phil
Rule Your Retirement Home Fool

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Author: katinga Big funky green star, 20000 posts Old School Fool Ticker Guide Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 119785 of 120816
Subject: Re: Transferring stocks to a charity after ex di Date: 1/2/2014 6:56 PM
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OK and thanks, Phil.

I think.

The way I think of it is that I should either get the share price on the ex dividend date as the value of the donated shares, or the share price plus the dividend per share on the day after the ex dividend date. The result I am seeing looks like a double financial standard.

In the end, it is the charity's finance officer, a CPA, who will send me a year end statement and determine the value of the transfer. I have notified her about the situation, and told her I'm fine with whatever she determines. It may be that she will get to learn something here as well.

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Author: irasmilo Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 119786 of 120816
Subject: Re: Transferring stocks to a charity after ex di Date: 1/2/2014 7:49 PM
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ROIC went ex div on December 12.

I transferred ROIC shares to a charity on December 13.

The dividend was paid to the charity.

I called Schwab on this. They checked and verified that apparently the transfer date and not the ex date applies to share transfers. I guess the dividend accrues to the shares and not the owner of the shares, or something.


I think the answer you got was wrong. I would speak to someone in Schwab's compliance department and request a citation to support their decision. If you had sold the shares on Dec 13, the dividend would have been yours, not the buyer's. In the absence of specific instructions from you to transfer the dividend along with the shares, the dividend still belongs to you.

Ira

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Author: foo1bar Big gold star, 5000 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 119789 of 120816
Subject: Re: Transferring stocks to a charity after ex di Date: 1/3/2014 3:28 PM
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In the end, it is the charity's finance officer, a CPA, who will send me a year end statement and determine the value of the transfer.

That's probably not the best plan.
The charity is not responsible for providing you with the correct value.
The correct value is the fair market value* when the shares were transferred. Not the value when you initiated the transfer (3 days earlier in my experience) And not the value that the charity sells the shares for (which is what I've gotten from a charity I donated stock to)

*fair market value is the average of the high and low for the day (assuming it's a stock that has a liquid market - which most likely we are talking about since you're dealing with a brokerage and it pays dividends, so assumably this is a stock that you can buy or sell on Nasdaq or NYSE or similar)

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Author: katinga Big funky green star, 20000 posts Old School Fool Ticker Guide Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 119790 of 120816
Subject: Re: Transferring stocks to a charity after ex di Date: 1/3/2014 4:42 PM
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The date of record came after the ex dividend date in this case. The ex date was the 12th, the gift transfer was the 13th, and the record date was the 16th. The charity indeed gets the dividend.

http://www.nasdaq.com/symbol/roic/dividend-history

http://www.investopedia.com/articles/02/110802.asp has this to say (courtesy of my Schwab account adviser):

Ex-date or Ex-dividend date - On (or after) this date the security trades without its dividend. If you buy a dividend paying stock one day before the ex-dividend you will still get the dividend, but if you buy on the ex-dividend date, you won't get the dividend. Conversely, if you want to sell a stock and still receive a dividend that has been declared you need to sell on (or after) the ex-dividend day. The ex-date is the second business day before the date of record.

Date of record - This is the date on which the company looks at its records to see who the shareholders of the company are. An investor must be listed as a holder of record to ensure the right of a dividend payout.

Date of payment (payable date) - This is the date the company mails out the dividend to the holder of record. This date is generally a week or more after the date of record so that the company has sufficient time to ensure that it accurately pays all those who are entitled.


So the charity gets the dividend, and there is no tax deduction for the loss of the dividend. And since stocks generally lose the value of the dividend in price on the ex div date, there's a small loss on that score, too.

Not complaining, lesson learned, but people should keep this in mind when giving a moderate to high yielder as a stock gift.

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Author: irasmilo Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 119792 of 120816
Subject: Re: Transferring stocks to a charity after ex di Date: 1/4/2014 10:42 AM
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All correct regarding the definitions of the various important dates. What is missing from the definitions is that the record date is three days after the ex-dividend date because trades/transfers take three days to settle. The real question is whether a transfer settles differently from a sale.

Again, I wouldn't be satisfied until I had a citation to a specific rule or regulation. The internet is full of incomplete and/or misleading information.

Ira

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Author: katinga Big funky green star, 20000 posts Old School Fool Ticker Guide Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 119799 of 120816
Subject: Re: Transferring stocks to a charity after ex di Date: 1/4/2014 7:09 PM
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Well, Schwab claims the record date is what counts for transfers. I think we can assume that this much is correct.

I still wonder however if the dividend stands as accrued to the shares on the X date, so that the dividend, too, is deductible.

This is not a lot of money at stake here, so it's not worth consulting a tax attorney. What kind of professional would one contact about this? Call an IRS help line?

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Author: TMFPMarti Big funky green star, 20000 posts Home Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 119800 of 120816
Subject: Re: Transferring stocks to a charity after ex di Date: 1/4/2014 8:21 PM
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I still wonder however if the dividend stands as accrued to the shares on the X date, so that the dividend, too, is deductible.

Did you digest my earlier response? Did you verify what I said in Pub 526?

Other than the special provision which is allowing you to deduct the value of your ROIC without selling it, if you want a deduction write a check. The special treatment is available only for long-term cap gains. Dividends, accrued, paid, or in your dreams are not LTCG.

I seem to recall some mention about the declaration of a dividend affecting the share price. So does an announcement that they've found oil that will net $40 billion a month forever. So what?

I really don't see the source of the confusion except that you're not getting the answer you want.

Phil
Rule Your Retirement Home Fool

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Author: katinga Big funky green star, 20000 posts Old School Fool Ticker Guide Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 119801 of 120816
Subject: Re: Transferring stocks to a charity after ex di Date: 1/4/2014 9:49 PM
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Did you digest my earlier response? Did you verify what I said in Pub 526?

I did a search of 'stock', 'dividend', 'appreciated', record date, etc., and I see where it speaks of appreciated stock. Do you have the page and column where this case is treated? Others on this thread have cast doubt on both your analysis and mine. I can see both sides of the argument, and pub. 526 does not deal with this. I would think this would rather be an SEC document of some sort.

I seem to recall some mention about the declaration of a dividend affecting the share price. So does an announcement that they've found oil that will net $40 billion a month forever. So what?

Because it was past the ex dividend date. The dividend had accrued to the shares. A major discovery/accident/etc. is not a valid comparison here.

I really don't see the source of the confusion except that you're not getting the answer you want.

Did you read the thread before posting?

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Author: Wradical Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 119802 of 120816
Subject: Re: Transferring stocks to a charity after ex di Date: 1/4/2014 11:52 PM
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Well, Schwab claims the record date is what counts for transfers. I think we can assume that this much is correct.

I still wonder however if the dividend stands as accrued to the shares on the X date, so that the dividend, too, is deductible.

This is not a lot of money at stake here, so it's not worth consulting a tax attorney. What kind of professional would one contact about this? Call an IRS help line?

===================================
OK, this makes more sense now that I think about it again.

We've been distracted by the contribution being right after the ex-div date, forgetting that the ex-div date is relevant only for sales and purchases. To get the dividend, you have to be the owner of record on the record date. If you're buying shares, that means the shares have to be put in your account by the record date. And that happens on the settlement date, not the trade date.

Likewise, if you SELL (as opposed to donate) the shares after the ex-div date, the shares are still in your account on the record date, because the settlement date hasn't occurred yet. So you will get the dividend.

But if you're donating the shares (or making a gift to anyone else) the ex-div. date doesn't matter, because you're not buying or selling. Whether you, or the done, is the owner on the record is a function of how fast the broker moves the securities.

Remember, the ex-div. date is merely derived by the lag between the trade date and the settlement date. The company specifies the record date, and the stock exchange takes it from there.

Bill

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Author: Wradical Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 119803 of 120816
Subject: Re: Transferring stocks to a charity after ex di Date: 1/4/2014 11:54 PM
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"Whether you, or the done, is the owner on the record date"

I meant to type "donee." If I said "recipient" I would have gotten it right. Maybe.

Bill

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Author: katinga Big funky green star, 20000 posts Old School Fool Ticker Guide Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 119804 of 120816
Subject: Re: Transferring stocks to a charity after ex di Date: 1/5/2014 8:35 AM
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Remember, the ex-div. date is merely derived by the lag between the trade date and the settlement date. The company specifies the record date, and the stock exchange takes it from there.

What if the record date falls after the settlement date on an outright sale?

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Author: irasmilo Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 119805 of 120816
Subject: Re: Transferring stocks to a charity after ex di Date: 1/5/2014 11:35 AM
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But if you're donating the shares (or making a gift to anyone else) the ex-div. date doesn't matter, because you're not buying or selling. Whether you, or the done, is the owner on the record is a function of how fast the broker moves the securities.

If that is the case, then there should exist a rule which can be cited that says (1) sales are an exception (three days to settle) to the general rule that the owner of record is established as soon as the broker moves the securities, or (2) directed transfers are an exception (as soon as broker moves securities) to the general rule that the owner of record is established on the settlement date. The broker should be able to provide a relevant citation from their own operations manuals and/or a regulatory body (STA, FINRA, NYSE, etc.)

I'm not disagreeing with your conclusion, just stating that whenever I receive information that runs counter to what I expect, I want to see supporting documentation. For example, here on this board we often provide citations to the IRC, IRS Regs, or Tax Court decisions. The OP, as far as we know, has been relying on the verbal representations of his broker - not an infallible source.

Ira

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Author: katinga Big funky green star, 20000 posts Old School Fool Ticker Guide Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 119810 of 120816
Subject: Re: Transferring stocks to a charity after ex di Date: 1/5/2014 9:13 PM
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The OP, as far as we know, has been relying on the verbal representations of his broker - not an infallible source.

I talked to the church treasurer today. She's a CPA who's also worked years for a foundation--so lots of foundation/charity experience. She says that the dividend stays with (accrues to?) the shares, and that I will get a statement from the church attributing the dividend to us as a donation.

I wish I had documentation of some form such as you list, Ira, but with the small size of the donation, it's not worth my while retaining someone to do the research. Advise from a CPA with charity experience is about as good as it is going to get in this case, I'm afraid. And I'll have the church statement as a CYA, should I ever get audited. And the church regularly has its books audited, so if there's any question, she'll point out the issue to the auditors.

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Author: JeanDavid Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 119811 of 120816
Subject: Re: Transferring stocks to a charity after ex di Date: 1/6/2014 6:29 AM
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And the church regularly has its books audited, ...

Really? This may be sensible, but mine has never had its books audited because none of the taxing authorities require us to file or pay taxes. And the members do not wish to bear the expense of an audit. Mine is very small, but has been around almost 300 years and our present building is almost 200 years old.

Does your church require audits for some purpose, or just to make sure the treasurer is not embezzling funds, or incompetent at arithmetic or simple accounting?

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Author: katinga Big funky green star, 20000 posts Old School Fool Ticker Guide Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 119812 of 120816
Subject: Re: Transferring stocks to a charity after ex di Date: 1/6/2014 8:49 AM
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The Episcopal Diocese requires audits. And the most important reason is to keep in compliance with non-profit tax status.

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Author: katinga Big funky green star, 20000 posts Old School Fool Ticker Guide Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 119813 of 120816
Subject: Re: Transferring stocks to a charity after ex di Date: 1/6/2014 8:51 AM
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Also, we have attendance of around 60.

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Author: RHinCT Big red star, 1000 posts Ticker Guide SC1 Red Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 119817 of 120816
Subject: Re: Transferring stocks to a charity after ex di Date: 1/7/2014 8:51 AM
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If you do not see the dividend, then I suggest you check with the charity to make sure they receive it. It seems worth making sure your broker doesn't "loose" it.

Yes, I have a suspicious and untrusting mind when it comes to institutions.

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