Handling the donation of stock for a church involves several important steps to ensure compliance, proper valuation, and acknowledgment. Here’s a comprehensive guide:
Establish a Brokerage Account
- Open an Account: The church must establish a brokerage account in its name to receive and manage stock donations.
- Choose a Broker: Consider using a discount broker (e.g., Charles Schwab, TD Ameritrade) for cost efficiency.
Valuation of Donated Stock
- Determine Value: Record the value of the stock on the date it was donated. Use the average of the highest and lowest prices on that day.
- Documentation: Keep detailed records of the number of shares, the date of donation, and the stock’s value on that date.
Acknowledgment to Donors
- Receipt: Provide a formal acknowledgment letter to the donor, including details of the stock donation (number of shares, date, and value). This is crucial for the donor’s tax records.
Compliance and Reporting
- Tax Implications: Understand the tax implications of stock donations. Long-term appreciated stock (held for more than a year) is more tax-efficient for donors.
Record as Asset: Record the stock donation as an asset in the church’s bookkeeping records.
Decision on Holding or Selling Stock
- Policy: Establish a clear policy on whether to hold or sell donated stock immediately. Selling immediately can avoid risks associated with market fluctuations.
- Dividends: If the stock pays dividends, decide how to handle them (e.g., reinvest or use for church operations).
Communication and Transparency
- Inform Donors: Communicate the process and benefits of stock donations to potential donors.
- Transparency: Maintain transparency in how stock donations are managed and utilized.
Regular Reviews
- Periodic Review: Regularly review the church’s policies and procedures for handling stock donations to ensure they remain effective and compliant.
By following these steps, a church can effectively manage stock donations, ensuring proper valuation, compliance, and acknowledgment, while maximizing the benefits for both the church and the donors.
If you need more specific advice, it might be helpful to contact Pro Advisor Support to answer your questions.
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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
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