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  • 1.  Recording stock amounts

    Posted 10-10-2024 08:18 AM

    Good morning everyone,

    I recently noticed that our finance department records stock gifts based on the stock price at the end of the business day on the settlement date, and that's the amount added to the donor's fund (with gains and losses applied to the stock account). However, my understanding is that, according to IRS guidelines, stock gifts should be valued based on the mean stock value, which is what we use for our database and reporting. This discrepancy in valuation results in differences in the gift amount. Is Finance's method of handling this appropriate?

    Thank you,

    Marta 



    ------------------------------
    Marta Kostrzewa
    Director of Finance for Institutional Advancement
    Pratt Institute
    mkostrze@pratt.edu
    ------------------------------


  • 2.  RE: Recording stock amounts

    Posted 10-10-2024 08:58 AM
      |   view attached
    You are correct about what the DONOR uses for tax purposes. I guess your Finance department wants to use a different method, which is unfortunate.

    I am attaching (as I have many times previously) a paper I wrote several years ago (I think around 2015, but I updated it in 2022) that discusses the entire stock donation process - and why I think it is important that we ALL use the same value. Please take a look at paragraph #6 on page #3 for a discussion on this matter.

    John

    John H. Taylor, Principal
    John H. Taylor Consulting, LLC
    2604 Sevier Street
    Durham, NC     27705

    919.816.5903 (cell/text)

    Serving the Advancement Community Since 1987




    Original Message


  • 3.  RE: Recording stock amounts

    Posted 10-10-2024 10:00 AM
    The issue here is that there are two different standards. The IRS says that the average of high/low is the value for the purpose of deductibility, and requires that we report that number to the donor. GAAP, on the other hand, calls for market close as the correct number for accounting valuation. GAAP prefers to measure the value of the business at a specific point in time - close of day - because it is consistent across many other valuation issues. This is purely a convention, but it is central to how accounting work. The IRS prefers to provide a deduction that is 'fair', in the sense that it is less subject to market fluctuations on any given day, and neither punishes nor rewards donors for timing the market. 

    In short, everyone is doing the right thing, but following two different playbooks. 


    Thank you,
    Isaac Shalev
    Data Strategy Expert
    Sage70, Inc.
    (917) 859-0151
    isaac@sage70.com

    Schedule a 30-minute consultation now:





    Original Message


  • 4.  RE: Recording stock amounts

    Posted 10-10-2024 03:18 PM
    Good afternoon, Marta - 

    I don't disagree with anything already shared by John and Isaac. What kind of caught my eye here was that your Finance folks opt for the closing sales value to record. My experience has been more that Finance folks I've worked with (until we had a few discussions) were more inclined to go with the settled value. That is, they would only record the actual cash realized after the brokerage assigned their fee and funds were actually disbursed. 

    To me, it all comes down to that alliterative affect which requires - as John mentioned in a recent post - consistent and cooperative meetings between Development/Advancement and Finance. AS/DevOps folks deal with the expanded version of the "Rs'; recording, recognition, receipting and reconciliation.  

    From what I've experienced (and heard of), more savvy organizations will not only recognize the total mean value of stock gifts they will also accommodate ensuring that value is added to the appropriate fund. That reasonable processing enables a consistent process for both sides of the transaction. It also allows DO/AS folks to effectively steward donors who make gifts of stock to pay down pledges.  

    Bottom line, there is a need to engage with Finance colleagues to discuss the pluses and minuses for different strategies around recognizing and reconciling values. Once you get that agreed upon and documented you can then wonder about all those other reconciliation challeges... ��

    Good luck and best regards - Amy
    Founding, Charter and Active member of AASP!



    Original Message


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