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  • 1.  Stock gift help

    Posted 03-27-2024 10:55 AM

    Good Morning,

    We just learned that a donor's broker sent us more shares of stock in 2023 than the donor intended. This was the broker's error, and the donor was not made aware. As it was a broker error, the broker was able to pull back the extra shares in 2024 without our involvement. The donor has not yet submitted their taxes, and the donor's CPA has let us know that they would prefer that we send a receipt for what the donor intended (i.e., the net amount of shares). We assume that it would be technically correct for us to receipt all of the shares that we received in 2023 and then send the donor a 1099 for the shares that were returned in 2024. But since the donor has not yet filed their 2023 taxes, would there be any consequences to us if we were to receipt the net amount? If there were to be an audit, would the IRS agree that this was a broker error and therefore it would be correct or understandable for us to receipt the net and for the donor to report the net?

    Thoughts?



    ------------------------------
    Karry Morton
    Director, Gift Services
    Children's Hospital Colorado Foundation
    kmorton@children's Colorado Foundation
    ------------------------------


  • 2.  RE: Stock gift help

    Posted 03-27-2024 11:04 AM
    You cannot hide the fact that you accepted all of those shares. They were 100% registered in your name.

    While I would ask Counsel and CFO for their advice, I don't think the IRS would care who made the error. I think your "technically correct" solution is the proper solution.

    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




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  • 3.  RE: Stock gift help

    Posted 03-27-2024 11:09 AM

    Thank you John, that aligns with what we are feeling as well.

     

    Karry Morton | Director, Gift Services
    Children's Hospital Colorado Foundation
    13123 East 16th Avenue, Box 045 | Aurora, CO 80045
    Phone: 720-777-1742 | Cell: 720-323-3305


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  • 4.  RE: Stock gift help

    Posted 03-27-2024 01:32 PM
    There are several intersecting issues here, with different relevant obligations. If the transaction was unwound - as though it never happened - and you have not issued a receipt yet, and you know that the donor hasn't claimed a tax benefit for 2023, then issuing a net receipt would be more appropriate. Your brokerage should be able to tell you whether the transaction was unwound or simply reversed. 

    If the transaction was simply reversed, a gross receipt is more appropriate, though you can certainly add details about the subsequent event on that receipt. The donor can always claim a lesser deduction, they are not obligated to claim the full amount they are entitled to. 

    As to a 1099 for the refunded shares, there is not a consensus about the correct practice. The IRS rule requires a 1099 for gains, profits, and income that is "fixed or determinable." In general a refund, a recovery of lost capital, is not taxable. However, in the case of a charitable donation, if the donor took a deduction, and the charity knows they took a deduction, a 1099 likely is required. But in this case, the donor can affirm that they are taking the net deduction only, and you can skip the 1099. However, many organizations prefer to issue 1099s for all donation refunds, rather than trying to determine if they are obligated in each case.

    Definitely a situations where advice of Counsel and/or the CFO is warranted. 


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

    Schedule a 30-minute consultation now:




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