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Author: DowDanny Big red star, 1000 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 121333  
Subject: Value of Charitable Gift of Stock Date: 7/13/1999 7:09 PM
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Howdy Tax-perts...

Y'all may point me to the relevent FAQ, but if you please, could you also give me the direct answer on this specific question ?

How do I determine the 'value' of charitable donation given in the form of stock shares ?

I mean this to be a completely narrow and technical question:


- Do I value the stock by closing price on the day I write the letter/give instructions to my brokerage to effect the transfer ?

- Or do I use the value on the day the shares physically disappear from my account ?

- Or should I use (and find out) the value of the shares the day they magically appear in my charitable organization's account ? Or the day they sell it ?

- And assuming I can determine which DAY to use to evaluate the value, do I have to use opening / closing/ average price per share on that day ?

- Or am I being silly, and am allowed a bit of fudge factor-ness in determining the price as somewhere in some range on some set of days around when I make the transfer ?

Thanks for your response.

- Danny

PS: Did I ever you tell you the story about how "a friend" made good on a chartable "pledge" by gifting stock - and how the stock then lost 10-15% in value between "pledge date" and the day the charity got around to selling it... and how the "charity" then wrote "my friend" to ask for the balance on the pledge ? There's one that doesn't make it into too many "fund raiser's instruction books" but it did leave a strong impression on "my friend" - who somehow neglected to contribute the following year.

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Author: UUinMN Three stars, 500 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 17297 of 121333
Subject: Re: Value of Charitable Gift of Stock Date: 7/14/1999 9:45 AM
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Warning: long, rambling post ahead!

Hi, Danny. Here's my non-professional, but experienced take on your questions.

The official IRS policy is that you average the high and low prices on the day the stock disappears from your account. On the other hand, the first time I gave stock to a charity, I listed method of valuation as "NYSE close", and I haven't heard anything about it. Maybe the shoe will drop, eventually.

I have some sympathy for the charity in the little tale you relate in your P.S. I chair the Finance Committee of my church, and we occasionally are given stock. We try to get the word out that people who do this should let us know when they do it, so we can sell the stock immediately. (We're not into investing, not yet. I am working to get an endowment fund set up, but that's another story...) But we've had the experience of finding out that someone gave us stock by seeing it show up on a brokerage statement. In an organization run mostly by volunteers, we're not always on top of everything as it happens, and it might indeed take us a while to "get around to selling it", since no one calls the broker every day. Would we expect the donor to make up any difference? Hmmm... Good question. The donor would certainly get a tax deduction for value at the time of the donation, but if the delay had been from their failure to communicate with us, I think I would ask them to consider making up the difference. This is a fairly small church, and I know the people, or most of them. Does that make a difference? I don't want to come on too strong.

Our church, and every other 501(c)3 organization, stands to benefit from donations of appreciated stock, but it can also introduce difficulties. One year at pledge time I had to ask one of our largest donors if he was still planning on paying his pledge from the previous year. (Fifty weeks into the fiscal year, and he'd paid nothing.) He replied that he was indeed going to give us some stock, but the time wasn't right yet. He was sure it was going to go up substantially in, oh, just a little while. I pointed out that our expenses continued, and we had a budget, and we were counting on getting the income during the fiscal year. He got patronizing. Why would I want the stock now, when it would be worth much more very soon? It was an illuminating experience, but not of the sort that I really go to church for.

Michael
Who sees it from both sides

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Author: TMFTaxes Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 17337 of 121333
Subject: Re: Value of Charitable Gift of Stock Date: 7/14/1999 11:04 PM
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[[The official IRS policy is that you average the high and low prices on the day the
stock disappears from your account. ]]

Right...the "mean" value of the high and low. I think that we are saying the same thing...but since the question is very specific, I would like to provide a very specific answer.

The best answer is one from the IRS regulations on this very issue. Here 'tis...

<<On Feb. 1, 1998, D contributed $10,000 in cash to Charity B and 50 shares of publicly traded stock to Charity C. The amount of the contribution to Charity B is $10,000, the amount of money contributed. The amount of the contribution to Charity C is the fair market value of the publicly traded stock on the date of the contribution. 102 On Feb. 1, 1998, the highest quoted selling price for the publicly traded stock given to Charity C was $48 and the lowest quoted selling price was $46. The fair market value of the stock on the date of D's contribution was the mean between the high and low prices, or $47 per share (($48 high + $46 low)/2). The amount of the contribution to Charity C is $2,350 (50 shares x $47 fair market value per share).>>

This comes from Reg 20.2031-2. The goofy thing is that this is really an estate tax regulation. But this reg provides that if there is a market for stock, the fair market value of the stock is the mean between the highest and lowest quoted selling prices on the valuation date. Because of the fact that valuation issues for charity fall along the same lines as for the FMV for estate tax inclusion, the regulations concerning valuation for estate and gift tax purposes are often consulted for purposes of valuing charitable contributions.

Hope this clears it right up.

TMF Taxes
Roy

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Author: moseykitty One star, 50 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 17342 of 121333
Subject: Re: Value of Charitable Gift of Stock Date: 7/15/1999 10:54 AM
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We still haven't cleard up which day he should use for the value calculations. When it goes in the mail? When it leaves his account?

The IRS told me last year that my holding period for a long term cap. gain began when I "controlled" the shares. And I bet this is the key word in this case as well. You probably control the shares right up to the instant they are transferred from your account, and then that would be the day to use.

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Author: DowDanny Big red star, 1000 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 17348 of 121333
Subject: Re: Value of Charitable Gift of Stock Date: 7/15/1999 2:27 PM
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> which day he should use for the value calculations. <

I think UUinMn answered this in the first post. As you suspect, it appears to be the day the stocks are transferred OUT of the account.

Thanks to Roy and Michael for the specifics and the references/explanations.

- Danny





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Author: TMFTaxes Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 17356 of 121333
Subject: Re: Value of Charitable Gift of Stock Date: 7/15/1999 7:12 PM
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[[We still haven't cleard up which day he should use for the value calculations.
When it goes in the mail? When it leaves his account?

The IRS told me last year that my holding period for a long term cap. gain began
when I "controlled" the shares. And I bet this is the key word in this case as well.
You probably control the shares right up to the instant they are transferred from
your account, and then that would be the day to use.]]

That may be what the IRS told you, but that's not quite correct.

When dealing with a gift, the gift is made when you irrevocably give up control of the asset in question. When stock is involved, it could be the day that it is transferred out of your account. But if there are instructions that you must MAIL to the broker, along with signed certificates, the gift date is likely the day that you MAILED the stock certificate to the broker. That may not be the same day that the donee receives the shares...but it would still likely be the date of your gift.

Any better??

TMF Taxes
Roy

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