CHARITABLE DONATION OPTIONS
By Angela N. Crawford, CPA – Manager
If your charity only seeks donations in the form of cash, it is time to start thinking outside the box. Individuals can gift long term capital gain property (think stocks and bonds) to a qualified charity and deduct the fair market value of the donation on their personal tax return as a charitable deduction.
What does this mean for your organization? It might mean potentially more money being gifted.
Let's say Diana Donor pledges $20,000 to your capital campaign for building renovations. Ms. Donor only has enough cash to pay $10,000 toward her pledge in the current year. However, Ms. Donor also holds 1,000 shares of stock that she purchased for $5 per share several years ago. The current market value of those shares is now $30 per share. Instead of using her $10,000 of cash, she can pay off the entire $20,000 pledge this year by donating the stock. In fact, because the donation is saving her tax dollars (she is able to deduct the fair market value of the gift or $20,000 as a charitable contribution for stock that only cost her $5,000), she decides to give your organization all 1,000 shares, or $30,000.
Of course, you should always recommend that your donors consult their tax advisor before making any sizable gift. Individuals may have unique situations limiting their charitable deductions. For example, if the donor paid $35 per share in the example above, she would likely have been better off to sell the stock and recognize the loss before donating the proceeds.
Finally, while it is the most common type of donation, the property that is donated does not have to be securities. Other common forms of donated property include cars, boats, land, jewelry, and artwork. Before deciding to accept gifts other than cash your organization should really have a gift acceptance policy in place. A gift acceptance policy can be used as guidance for the organization in accepting appropriate gifts. For example, if a donor wants to donate a 1980 Ford Pinto, you can point to your gift acceptance policy to decline such a gift as your gift acceptance policy doesn't permit your organization to accept gifts of vehicles.
For more information on charitable gifts or gift acceptance policies, contact your accounting professional at Blue.
If you have any questions regarding the article above or any other issue affecting your not-for-profit organization please contact your Blue & Co. advisor or e-mail us at firstname.lastname@example.org or call us at 800-717-BLUE
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CIRCULAR 230 DISCLOSURE: To ensure compliance with recently-enacted U.S. Treasury Department Regulations, we are now required to advise you that, unless otherwise expressly indicated, any federal tax advice contained in this communication, including any attachments, is not intended or written by us to be used, and cannot be used, by anyone for the purpose of avoiding federal tax penalties that may be imposed by the federal government or for promoting, marketing or recommending to another party any tax-related matters addressed herein.