Keep These Things in Mind When Considering Gifts of Your Assets
Market declines and inflation have made 2022 a more challenging year for many charitably-inclined individuals to fulfill traditional giving objectives or early-year gifting intentions. Here are some considerations to talk about with your advisor – and OCF – when you are considering making a gift of assets beyond cash or stock. These types of gifts can be incredibly meaningful for the nonprofit organization and can provide helpful tax benefits for you.
With annual inflation hovering at 8% (and no relief in sight) and liquidity perhaps less than ideal, cash may be hard to part with. Giving stock may also be hard to swallow, at least psychologically, in a down market. For example, assume shares of a stock you own have dropped 15% over the last quarter, from $200 per share to $170. If you had been intending to make a $10,000 gift to charity this year, last quarter you could have accomplished that with a gift of 50 shares. Now, though, you will need to give nearly 59 shares to hit that $10,000 target. Realizing that it will "take more shares to do the same good,” you may be less inclined to give stock shares that have recently declined in value to your donor advised funds and other charitable recipients.
So, with money tight and stock perhaps painful to give, you may be considering alternatives to cash or securities for gifts to charity. You and your advisor need to be aware of the rules—meaning the IRS’s rules—to both meet your objectives and stay in Uncle Sam’s good graces.
A high-level understanding starts with the $5,000 threshold for documentation that appears on IRS Form 8283, titled Noncash Charitable Contributions. This form is required to be filed with any tax return claiming such a deduction.
Substantiation of value up to $5,000 is routine and consistent with securities (i.e., acquisition and contribution dates, fair market value of the item(s) and method of value determination). Requirements for gifts up to $500 are less stringent.
Real estate, closely-held stock, art, jewelry, vehicles or baseball card collections, for example, valued at $5,000 or greater require more specifics. They’re also subject to greater scrutiny if the donor is audited or questioned.
Consider the additional documentation requirements:
- From you, the donor: the type of gift, description, physical location and a third-party qualified appraisal of value. Declaring the value to substantiate your charitable deduction rests with you, and not your CPA or recipient nonprofit, which is why the obligation of seeking a qualified appraisal rests with you.
- From the appraiser: a signed declaration on the tax form describing their qualifications and identification number; that they do this work regularly; and where they can be located.
- From the recipient (the charity, sometimes known as the “donee”): signed confirmation of qualification, receipt, federal identification number and a commitment to document and notify if disposition occurs within three years. (OCF is accustomed to filing this documentation for donors' gifts to funds.)
So while a high-value donation of real property or other alternative asset to your charitable fund at OCF is wonderful — and relieves the pressure around making traditional cash or securities gifts — be sure to connect with your legal and financial advisor about the details. And be assured that OCF philanthropic advisors can work with your advisors to help make the process as smooth as possible.
The team at OCF is a resource and sounding board as you consider your philanthropic goals. We understand the charitable side of the equation and are happy to work with your advisor. This article is provided for informational purposes only. It is not intended as legal, accounting, or financial planning advice.