Publicly traded securities are the most common form of noncash charitable gifts. You may find that securities are the most attractive assets to give, because they are often highly appreciated, easily transferred, and in most cases, easily valued for deduction purposes without the need for a formal appraisal. The most common forms of securities gifts are shares of stock, bonds, and shares of mutual funds.
The typical donor:
Holds securities that are highly appreciated in value.
Holds publicly traded securities.
Wants to transfer securities prior to sale.
Gifts features and benefits:
Immediate income tax deduction.
Deduction based on fair market value.
Avoidance of capital gains taxes.
Gift can be timed to match changes in the market.
How you proceed depends on how your individual securities are held. If you hold the securities in your possession, they may be sent directly to LDS Philanthropies. If the stock, bond, or mutual fund share is held in a brokerage account, you will need to work with your broker to complete the transaction. It is important that you send the certificate under separate cover from the stock power. The stock power must have a medallion signature guarantee, which you can obtain from your local bank. Gifts of securities held in a brokerage account can be made directly through the Church’s Donations-in-Kind office. This office will work directly with your broker to correctly complete your gift.
Gifts of securities provide a less expensive way for you to give than cash. For example, if you paid $1,000 for your stock five years ago and today’s fair market value is $3,000, you will receive an income tax deduction for the full fair market value, even though your cost basis in the security (what you paid for the stock) is only $1,000. The net tax benefit reduces the cost of your gift. To avoid capital gains tax, it is important to make your gift prior to selling the securities.
Your gift of stocks, bonds, or mutual fund shares is effective for income tax purposes, and hence deductible, when your certificate, accompanied by a properly prepared stock power in the name of the receiving charity, is unconditionally delivered to LDS Philanthropies or one of its staff members. If the certificate is mailed to LDS Philanthropies and postmarked prior to the end of the current year, your deduction may be taken on the date the certificate is mailed, even though LDS Philanthropies doesn’t receive the certificate until the next year. For safety purposes, the executed stock power should not be mailed in the same envelope with the stock certificate.
If you deliver your stock certificate to a broker who acts as your agent, your deduction is not effective until your agent delivers the certificate to LDS Philanthropies or one of its staff members. If your certificate is delivered to the issuing corporation with instruction to transfer the security into the name of the Church or one of its institutions, the gift is not deductible until the security is actually transferred on the books of the corporation. Since this date is unpredictable, this method of making gifts of stocks and bonds is usually not desirable.
If the securities you are giving are held in a brokerage account or bank trust account (as is frequently the case when the securities are held by a revocable trust), instructions to your broker or trustee to transfer the securities to the Church or one of its institutions will not complete your gift for tax purposes until your broker or trustee actually delivers the securities to the Church’s Donations-in-Kind office.