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Gift of private stock for future sale

  • 1.  Gift of private stock for future sale

    Posted 05-12-2021 02:10 PM
    We have a donor who would like to give a gift of privately held stock. The stock will be transferred to us, but cannot be sold until the donor sells their business (whose stock they've given us). We use Raiser's Edge. Here are my questions:

    1. Because we are receiving stock and not immediately selling it there is no cash gift; how do we record the transfer of stock on their record?
    2. I assume we value the stock on the day it is transferred; I also assume we can count it for fundraising and recognition purposes, but cannot count from a business office standpoint. How do others with RE record these types of gifts? Pledges? Other? Is it a planned gift?
    3. For those who accept stock to be sold at a future date, who is in charge of keeping track of when the stock should be sold?
    4. Because we cannot sell the stock until the donor sells their business, does this make the gift a conditional gift?

    Thanks for any help and insights you can provide! We want to make sure we are properly recording and tracking this gift!

    -Liz

    ------------------------------
    Liz Dixon-Eversole
    Director of Advancement Operations
    Milton Academy
    ------------------------------


  • 2.  RE: Gift of private stock for future sale

    Posted 05-12-2021 02:23 PM
    CASE urges caution when determining whether or how to count these gifts of "closely held stock."  You have no guarantee the stock will be worth anything when you can sell it - if at all.

    While you could record it at today's value as determined by reviewing the company financial statements, CASE suggests leaving the recording/counting value to your Gift Acceptance Committee.

    Many Gift Acceptance Policies will not permit accepting these gifts - or at the very least counting them - unless you can sell them upon receipt and have a likely buyer.  Here, the donor has placed a restriction on you prohibiting sale at all until the company is sold.  Your auditors might regard this as a conditional gift and, therefore, not recognized as a deductible gift.

    So, the short answer is this proposed gift needs a deeper dive by your gift acceptance folk, CFO, and maybe even your lawyer.  CASE points out that long-term ownership in a privately held company might not always be a good thing.  From page 56 of the Standards:

    "6.2.3 Gifts of Closely Held Stock
    Institutions contemplating accepting gifts of closely held stock must recognize that there is no guarantee that the security can or ever will be sold.  There should also be a careful review by the institution's gift acceptance committee as to whether the nature of the business the institution is about to become a partial owner of is consistent with the institution's own mission."

    John H. Taylor
    Principal
    John H. Taylor Consulting, LLC
    2604 Sevier St.
    Durham, NC   27705
    919.816.5903 (cell/text)

    Serving the Advancement Community Since 1987






  • 3.  RE: Gift of private stock for future sale

    Posted 05-12-2021 02:41 PM
    Thanks, John. 

    Our CFO and gift acceptance group has said yes to the gift, but they are leaving all the details of recording it up to the operations team. I will definitely check in with our auditors!

    -Liz

    Liz Dixon-Eversole
    pronouns: she/her/hers
    Director of the Milton Fund &
    Advancement Operations
    Milton Academy
    170 Centre Street
    Milton, MA  02186
    (w) 617.898.2374









  • 4.  RE: Gift of private stock for future sale

    Posted 05-12-2021 03:14 PM
    As to your question about who tracks something like this, I have seen different answers.  Including no one :-).

    What I have found works best is to put the onus on the MGO who cultivated the gift.  They have a relationship with the donor and are most likely going to find out first.

    We never accepted any of these at NC State that did not have an immediate buyer.  But at Duke, two similar were given prior to my arrival in 1986.  I implemented the above protocol and added a to-do on my calendar to prompt the MGO once/year.

    BTW, when I left Duke 16 years later both of those gifts remained unsold . . .

    John H. Taylor
    Principal
    John H. Taylor Consulting, LLC
    2604 Sevier St.
    Durham, NC   27705
    919.816.5903 (cell/text)

    Serving the Advancement Community Since 1987







  • 5.  RE: Gift of private stock for future sale

    Posted 05-12-2021 03:22 PM

    To follow-up on John's wisdom, our Gift Acceptance Policy specifically prohibits acceptance of this sort of stock gift for all the reasons John has stated. To support that, it also specifically states all stock must be sold immediately upon receipt. This helps us avoid this sort of conundrum. Good luck!! -Carol

     

    Carol Nash (she/her/hers)

    Advancement Coordinator and Database Manager

    The Awty International School

    7455 Awty School Lane  |  Houston, Texas 77055

    Direct: 713-328-5861  |  www.awty.org

     

    image010.jpg@01D43F65.033811C0

     

    Houston's Premier International School

     

     

     






  • 6.  RE: Gift of private stock for future sale

    Posted 05-12-2021 03:46 PM
    I will only add on to the conversation to say that our organization has recently decided to contract with Charitable Solutions, LLC to address these kinds of issues. Essentially, they are a consulting firm specializing in mitigating the risk of accepting these kinds of non-cash gifts and liquidating them. For all intents and purposes, they act as an intermediary DAF specializing in handling these transactions where charities may not have the expertise or resources to so themselves. This allows us the flexibility to turn a "no" into a "maybe" in most cases.

    Matt Bain
    Executive Director, Advancement Services
    Division of University Advancement
    Kennesaw State University
    404-944-9130





  • 7.  RE: Gift of private stock for future sale

    Posted 05-14-2021 08:57 AM
    Thank you everyone for the helpful feedback. I appreciate it!

    Liz Dixon-Eversole
    pronouns: she/her/hers
    Director of the Milton Fund &
    Advancement Operations
    Milton Academy
    170 Centre Street
    Milton, MA  02186
    (w) 617.898.2374