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Stock Donator vs. Donor Advised Funds

A donor-advised fund is a charitable giving vehicle administered by another entity and created for the purpose of managing charitable donations on behalf of an organization, family, or individual.

A donor-advised fund requires the donor to set aside a certain sum of money that may be invested in stocks, and later, if the stocks appreciate in value, they can donate those stocks without worrying about capital gains taxes.

The good thing about donor advised funds is that, when they increase in value, the donor gets to claim a tax deduction that was larger than their cost basis.

THE BAD THING about donor advised funds, is that when the portfolio is down, the donor will claim a smaller deduction that their cost basis.  AND DONOR ADVISED FUNDS CHARGE FEES TO DONORS!  You pay for someone else to control your portfolio and you lose control of donating only the winning stocks.

With Stock Donor, you don’t need to donate until you have a gain!  Your portfolio remains solely under your control ! Therefore you can always donate and receive a deduction that is larger than your cost basis!  Also, donors NEVER have to pay Stock Donator a fee for using our service. 100% of the FMV of the tax donation will belong to the Donors!

Open a Stock Donator account today and start donating stocks to charities the fast, easy and secure way.

 

 

Another article in Kiplinger describes benefits of donating Stock

Kimberly Lankford, Contributing Editor at Kiplinger’s Personal Finance describes how When giving a gift, how your investment has fared will make a big difference on your taxes.

She says that the bigger the capital gains, the more advantageous it is to donate stock over cash.

She also says that before a donor gives away stock, they should first make sure the charity is set up to deal with the gift. Some small charities don’t have brokerage accounts and may have a tough time selling the stock or mutual funds.

Read more: http://www.kiplinger.com/columns/ask/archive/2007/q0604.htm

Calculate your tax savings using our stock donation calculator.

IRS publication 561

Questions and answers regarding IRS Publication 561 for Stock Donations to 501c3s and other charities.

What Is Fair Market Value (FMV)?

To figure how much you may deduct for property that you contribute, you must first determine its fair market value on the date of the contribution.

Fair market value.

Fair market value (FMV) is the price that property would sell for on the open market. It is the price that would be agreed on between a willing buyer and a willing seller, with neither being required to act, and both having reasonable knowledge of the relevant facts. If you put a restriction on the use of property you donate, the FMV must reflect that restriction.

Example 1.

If you give used clothing to the Salvation Army, the FMV would be the price that typical buyers actually pay for clothing of this age, condition, style, and use. Usually, such items are worth far less than what you paid for them.

Example 2.

If you donate land and restrict its use to agricultural purposes, you must value the land at its value for agricultural purposes, even though it would have a higher FMV if it were not restricted.

Factors.

In making and supporting the valuation of property, all factors affecting value are relevant and must be considered. These include:

  • The cost or selling price of the item,
  • Sales of comparable properties,
  • Replacement cost, and
  • Opinions of experts.

These factors are discussed later. Also, see Table 1 for a summary of questions to ask as you consider each factor.

Date of contribution.

Ordinarily, the date of a contribution is the date that the transfer of the property takes place.

Stock.

If you deliver, without any conditions, a properly endorsed stock certificate to a qualified organization or to an agent of the organization, the date of the contribution is the date of delivery. If the certificate is mailed and received through the regular mail, it is the date of mailing. If you deliver the certificate to a bank or broker acting as your agent or to the issuing corporation or its agent, for transfer into the name of the organization, the date of the contribution is the date the stock is transferred on the books of the corporation.

Stocks and Bonds

The value of stocks and bonds is the FMV of a share or bond on the valuation date. See Date of contribution, earlier, under What Is Fair Market Value (FMV).

Selling prices on valuation date.

If there is an active market for the contributed stocks or bonds on a stock exchange, in an over-the-counter market, or elsewhere, the FMV of each share or bond is the average price between the highest and lowest quoted selling prices on the valuation date. For example, if the highest selling price for a share was $11, and the lowest $9, the average price is $10. You get the average price by adding $11 and $9 and dividing the sum by 2.

 

No sales on valuation date.

If there were no sales on the valuation date, but there were sales within a reasonable period before and after the valuation date, you determine FMV by taking the average price between the highest and lowest sales prices on the nearest date before and on the nearest date after the valuation date. Then you weight these averages in inverse order by the respective number of trading days between the selling dates and the valuation date.

Example.

On the day you gave stock to a qualified organization, there were no sales of the stock. Sales of the stock nearest the valuation date took place two trading days before the valuation date at an average selling price of $10 and three trading days after the valuation date at an average selling price of $15. The FMV on the valuation date was $12, figured as follows:
[(3 x $10) + (2 x $15)] ÷ 5 = $12

Listings on more than one stock exchange.

Stocks or bonds listed on more than one stock exchange are valued based on the prices of the exchange on which they are principally dealt. This applies if these prices are published in a generally available listing or publication of general circulation. If this is not applicable, and the stocks or bonds are reported on a composite listing of combined exchanges in a publication of general circulation, use the composite list. See also Unavailable prices or closely held corporation, later.

Bid and asked prices on valuation date.

If there were no sales within a reasonable period before and after the valuation date, the FMV is the average price between the bona fide bid and asked prices on the valuation date.

Example.

Although there were no sales of Blue Corporation stock on the valuation date, bona fide bid and asked prices were available on that date of $14 and $16, respectively. The FMV is $15, the average price between the bid and asked prices.

No prices on valuation date.

If there were no prices available on the valuation date, you determine FMV by taking the average prices between the bona fide bid and asked prices on the closest trading date before and after the valuation date. Both dates must be within a reasonable period. Then you weight these averages in inverse order by the respective number of trading days between the bid and asked dates and the valuation date.

Example.

On the day you gave stock to a qualified organization, no prices were available. Bona fide bid and asked prices 3 days before the valuation date were $10 and 2 days after the valuation date were $15. The FMV on the valuation date is $13, figured as follows:
[(2 x $10) + (3 x $15)] ÷ 5 = $13

Prices only before or after valuation date, but not both.

If no selling prices or bona fide bid and asked prices are available on a date within a reasonable period before the valuation date, but are available on a date within a reasonable period after the valuation date, or vice versa, then the average price between the highest and lowest of such available prices may be treated as the value.

Large blocks of stock.

When a large block of stock is put on the market, it may lower the selling price of the stock if the supply is greater than the demand. On the other hand, market forces may exist that will afford higher prices for large blocks of stock. Because of the many factors to be considered, determining the value of large blocks of stock usually requires the help of experts specializing in underwriting large quantities of securities, or in trading in the securities of the industry of which the particular company is a part.

Unavailable prices or closely held corporation.

If selling prices or bid and asked prices are not available, or if securities of a closely held corporation are involved, determine the FMV by considering the following factors.

  • For bonds, the soundness of the security, the interest yield, the date of maturity, and other relevant factors.
  • For shares of stock, the company’s net worth, prospective earning power and dividend-paying capacity, and other relevant factors.

Other factors.

Other relevant factors include:

  • The nature and history of the business, especially its recent history,
  • The goodwill of the business,
  • The economic outlook in the particular industry,
  • The company’s position in the industry, its competitors, and its management, and
  • The value of securities of corporations engaged in the same or similar business.

For preferred stock, the most important factors are its yield, dividend coverage, and protection of its liquidation preference.

You should keep complete financial and other information on which the valuation is based. This includes copies of reports of examinations of the company made by accountants, engineers, or any technical experts on or close to the valuation date.

Restricted securities.

Some classes of stock cannot be traded publicly because of restrictions imposed by the Securities and Exchange Commission, or by the corporate charter or a trust agreement. These restricted securities usually trade at a discount in relation to freely traded securities.

To arrive at the FMV of restricted securities, factors that you must consider include the resale provisions found in the restriction agreements, the relative negotiating strengths of the buyer and seller, and the market experience of freely traded securities of the same class as the restricted securities.

Publicly traded securities

Publicly traded securities.

Even if your claimed deduction is more than $5,000, neither a qualified appraisal nor Section B of Form 8283 is required for publicly traded securities that are:

  • Listed on a stock exchange in which quotations are published on a daily basis,
  • Regularly traded in a national or regional over-the-counter market for which published quotations are available, or
  • Shares of an open-end investment company (mutual fund) for which quotations are published on a daily basis in a newspaper of general circulation throughout the United States.

Publicly traded securities that meet these requirements must be reported on Form 8283, Section A.

A qualified appraisal is not required, but Form 8283, Section B, Parts I and IV, must be completed, for an issue of a security that does not meet the requirements just listed but does meet these requirements:

  1. The issue is regularly traded during the computation period (defined later) in a market for which there is an “interdealer quotation system” (defined later),
  2. The issuer or agent computes the “average trading price” (defined later) for the same issue for the computation period,
  3. The average trading price and total volume of the issue during the computation period are published in a newspaper of general circulation throughout the United States, not later than the last day of the month following the end of the calendar quarter in which the computation period ends,
  4. The issuer or agent keeps books and records that list for each transaction during the computation period the date of settlement of the transaction, the name and address of the broker or dealer making the market in which the transaction occurred, and the trading price and volume, and
  5. The issuer or agent permits the Internal Revenue Service to review the books and records described in item (4) with respect to transactions during the computation period upon receiving reasonable notice.

An interdealer quotation system is any system of general circulation to brokers and dealers that regularly disseminates quotations of obligations by two or more identified brokers or dealers who are not related to either the issuer or agent who computes the average trading price of the security. A quotation sheet prepared and distributed by a broker or dealer in the regular course of business and containing only quotations of that broker or dealer is not an interdealer quotation system.

The average trading price is the average price of all transactions (weighted by volume), other than original issue or redemption transactions, conducted through a United States office of a broker or dealer who maintains a market in the issue of the security during the computation period. Bid and asked quotations are not taken into account.

The computation period is weekly during October through December and monthly during January through September. The weekly computation periods during October through December begin with the first Monday in October and end with the first Sunday following the last Monday in December.

 

Table 1. Factors That Affect FMV.

IF the factor you are considering is… THEN you should ask these questions…
cost or selling price Was the purchase or sale of the property reasonably close to the date of contribution?
Was any increase or decrease in value, as compared to your cost, at a reasonable rate?
Do the terms of purchase or sale limit what can be done with the property?
Was there an arm’s-length offer to buy the property close to the valuation date?
sales of comparable properties How similar is the property sold to the property donated?
How close is the date of sale to the valuation date?
Was the sale at arm’s-length?
What was the condition of the market at the time of sale?
replacement cost What would it cost to replace the donated property?
Is there a reasonable relationship between replacement cost and FMV?
Is the supply of the donated property more or less than the demand for it?
opinions of experts Is the expert knowledgeable and competent?
Is the opinion thorough and supported by facts and experience?

SOURCE – IRS WEBSITE

Medallion Signature Guarantee

A medallion signature guarantee is a special signature guarantee for the transfer of securities. It is a guarantee by the transferring financial institution that the signature is genuine and the financial institution accepts liability for any forgery.

Signature guarantees protect shareholders by preventing unauthorized transfers and possible investor losses. They also limit the liability of the transfer agent who accepts the certificates.

Different institutions have different policies as to what type of identification they require to provide the medallion guarantee and whether they charge a fee for such service. Most institutions will not guarantee a signature of someone who is not their customer.

If you were told that your stock transfer requires a Medallion Signature Guarantee, please take a print out of the transfer request that Stock Donator emailed to you to a local branch office of your financial institution. A copy of the transfer request was sent to the email address you provided and is available in your account history if you have a Stockdonator Account.

Your financial institution will then confirm your identity and provide the Medallion Signature Guarantee. Once the Guarantee is received, please mail the transfer request per instructions provided on the form.

If you have any questions, please contact us using the link at the bottom of the page

Red Cross Initiates Stock Donation Program for Japan Earthquake Victims

Company Expands Siebert Charitable Stock Donation Program to Include New International Relief Efforts as Investors Show Interest in Donating Stock to Help in Japan Tragedy

On Tuesday, March 22, 2011 — The American Red Cross and Siebert Financial Corp. (NASDAQ: SIEB)  announced an expansion to a program aimed at encouraging stock donations to aid the victims of the Japan earthquake and tsunami disaster.  The plan eliminated for a short period of time any commission charges on sales of stock donated to the Red Cross, for the victims of the Japan earthquake and tsunami.

As an example of Siebert’s program, if a contribution to the Red Cross involves 200 shares of stock trading at $20 per share, the value of the contribution could be increased by more than $120 by eliminating commissions that would typically be charged by a full-commission broker.  To date, Siebert has sold more than $16,500,000 in stock donated to the Red Cross.

Stock  Donator commends both the Red Cross and Siebert for their efforts and for identifying the tax benefits to donors of donating stock over donating cash.  Stock Donator reminds you that we make donating stock to non profits an easy, secure, and simple online process.  Open an account today!  

Article on Motley Fool Describes Benefits of Stock Donations

There is a great article on the Motley Fool by Roy Lewis which explains in detail the benefits of stock donations.  That article can be found hereA http://www.fool.com/FoolCharityFund/Donating_Stock.htm

Among other things it gives illustrative examples of how much a donor could save if they donate stock rather than cash.

Stock Donator prides itself on being the easiest way to give stock to organizations. Sign up for a free account today.

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