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Author
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Topic: Charitable Gifts of Securities
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FN_User
Member
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posted 09-07-2000 03:26 PM
 
What is the best way to record the gift of securities to charity?Assume for example that 100 shares of XYZ CO were given to the Heart Fund on 6-1-00. How should this be recorded?
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margaret miles
Member
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posted 09-08-2000 11:17 AM
I recommend the following:
- Decide if you want to track the gift by the security name or charity. Whichever you decide, use that name consistently as the payor-payee to enter the transaction.
- In you brokerage account, enter the transaction as a normal "sell". The proceeds would be the amount of the cost basis of the assets being sold.
- Calculate the difference between the fair market value of the gift and the cost basis of the gift. In your brokerage account, enter the difference as a deposit (if the security has an appreciated value) or as a charge (if the security has a loss). Use a non-taxable income account for the entry. Be sure to enter a description in the memo section that describes the charity name, security name and #of shares plus the fair market value and cost basis.
- Add the previous 2 entries together. The sum should be the amount of the charitable contribution. In your brokerage account, enter the charitable contribution as a charge. Use your charitable expense account for the entry and include the same comprehensive memo as in 3 above.
The results of this process are:
- Your security is removed from your assets
- Unrealized gains or losses is correctly updated
- The Asset & Liability information is properly updated
- No gain or loss is reported on schedule D
- Charitable expense is recorded on the income statement
- You can view the entire transaction in "Transaction by Payee/Payor Report" and give the report to your tax preparer at year end.
The only problem is the non-taxable income account. For financial statement reporting purposes, this account effectively reduces the expense of the charitable gift to the donor's basis of the gift. The only way I know to offset the problem is substitute the owner's capital account for the non-taxable income account. I never do this.------------------
m miles [This message has been edited by fniadmin (edited 09-18-2000).]
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John
Administrator
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posted 09-08-2000 04:28 PM
A similar way is to "sell" the security for zero amount in the broker cash account, since no money was received. The Multiple Distribution will appear as showing the capital gains amount and relieving Unrealized Gains for the correct amount. Now add 2 distributions. One for the amount of the value of the gift to a contributions in kind expense account to appear on schedule A. The second distribution is for the same offseting amount but to the some income account with no tax affect. This same account can be used on the second line for the capital gain account since this is transaction does not have any taxable capital gain income. Also the sold asset needs to have the Tax Code changed to No Tax Effect so it will not appear on Schedule D. This is illustrated in the Sample data with a Gift of Security transaction in the Broker Cash Acct in Nov. Question? If security has a loss, then would it be better to sell it. Take the taxable loss and donate the cash for same amount for the value of the security? In other words, do you ever donate a security with at loss?
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