To facilitate the donation of publicly traded securities to your church, the process involves several steps to ensure compliance with IRS regulations and maximize the donors’ tax benefits. Here’s a guide on how to handle such a donation:

  1. Establish a Brokerage Account for the Church
  • Open an Account: The church should set up a brokerage account to receive the securities. This account will be used to accept the transfer of the donated securities.
  • Provide Account Information: Once the account is set up, provide the donors with the necessary account details, including the account number and the brokerage firm’s name.
  1. Donor Instructions for Transferring Securities
  • Contact Their Broker: The donors should contact their broker to initiate the transfer of the securities to the church’s brokerage account.
  • Provide Written Instructions: The donors will need to provide written instructions to their broker, specifying the details of the securities to be transferred, including the type of securities, the number of shares, and the receiving account information.
  1. Documentation and Acknowledgment
  • Written Acknowledgment: The church must provide a contemporaneous written acknowledgment to the donors. This acknowledgment should include:
    • A description of the securities donated (but not the value).
    • A statement that no goods or services were provided by the church in return for the donation, if that is the case.
    • If any goods or services were provided, a description and good faith estimate of their value.
    • If the only benefit received was an intangible religious benefit, a statement to that effect.
  1. Valuation of the Securities
  • Fair Market Value (FMV): The FMV of the donated securities is determined by the average of the highest and lowest quoted selling prices on the date of the contribution.
  • Qualified Appraisal: A qualified appraisal is not required for donations of publicly traded securities if market quotations are readily available on an established securities market.
  1. Tax Reporting for the Donors
  • Form 8283: If the value of the donated securities exceeds $500, the donors must complete Section A of IRS Form 8283 and attach it to their tax return.
  • Capital Gain Property: The donors can generally deduct the FMV of the securities if they have held them for more than one year, as they are considered capital gain property.
  1. Church’s Responsibilities
  • Sell the Securities: The church may want to sell or hold the securities. The proceeds from the sale can be used for the church’s purposes.
  • Form 8282: If the church sells the donated securities within three years of the donation, it must file Form 8282 with the IRS and provide a copy to the donor.

Example Scenario

Donor Action: John and Jane Doe decide to donate 100 shares of XYZ Corporation stock to their church. They contact their broker and provide written instructions to transfer the shares to the church’s brokerage account.

Church Action: The church receives the shares in its brokerage account. The church then provides John and Jane with a written acknowledgment that includes a description of the donated shares and states that no goods or services were provided in return.

Valuation: On the date of the donation, the highest quoted selling price of XYZ stock was $50, and the lowest was $48. The FMV of the donation is calculated as the average of these prices, which is $49 per share. Therefore, the total value of the donation is $4,900 (100 shares x $49).

Tax Reporting: John and Jane complete Section A of Form 8283 and attach it to their tax return, claiming a charitable deduction of $4,900.

By following these steps, the church can efficiently handle the donation of publicly traded securities, ensuring compliance with IRS regulations and providing the donors with the necessary documentation for their tax records.

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Clergy Financial Resources serves as a resource for clients to help analyze the complexity of clergy tax law, church payroll & HR issues. Our professionals are committed to helping clients stay informed about tax news, developments and trends in various specialty areas.

This article is intended to provide readers with guidance in tax matters. The article does not constitute, and should not be treated as professional advice regarding the use of any particular tax technique. Every effort has been made to assure the accuracy of the information. Clergy Financial Resources and the author do not assume responsibility for any individual’s reliance upon the information provided in the article. Readers should independently verify all information before applying it to a particular fact situation, and should independently determine the impact of any particular tax planning technique. If you are seeking legal advice, you are encouraged to consult an attorney.

For more information or if you need additional assistance, please use the contact information below.

Clergy Financial Resources
11214 86th Avenue N.
Maple Grove, MN 55369

Tel: (888) 421-0101 
Fax: (888) 876-5101
Email: clientservices@clergyfinancial.com

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