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Fees incurred when gift of mineral rights were sold

  • 1.  Fees incurred when gift of mineral rights were sold

    Posted 08-25-2021 09:32 AM

    We've been receiving a lot of out of the ordinary gifts in the last year or so (for which I'm grateful), and the latest involves the gift of mineral rights. A donor gave us mineral rights that my institution sold for $800,000. To sell the rights the institution accrued $150,000 in legal and brokerage fees. Both of those figures are fuzzy numbers that I'm using for the sake of this example. The question we're kicking around is if the gift amount that should be recorded in our donor recognition software is $800,000 or $650,000. Our finance department believes it should be $650,000, and my office is saying $800,000. Can anyone offer any insight on this?



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    Robyn Smith
    Director of Advancement Services
    Randolph College
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  • 2.  RE: Fees incurred when gift of mineral rights were sold

    Posted 08-25-2021 09:52 AM
    CASE and the IRS agree on this point.  The gift you received and should count is the appraised value of the property or rights.  That is reflective of the asset you received and now own.  What happens next is not tied to fundraising.

    Just as with gifts of stock or virtual currency, the institution assumes a risk regarding the future sale of that property.  Sometimes you make money, and sometimes you do not.  But whatever you sell the property for does not change the original gift amount.  Nor do you need to account for the increase or decrease in your advancement system or reports.

    On the other hand, the Business Office will need to record a gain or a loss for any change in book value.  And they will also need to account for any fees and associated costs - just as they would for broker fees when selling stock.

    John

    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: Fees incurred when gift of mineral rights were sold

    Posted 08-25-2021 09:58 AM

    Hi Robyn!

    Here-we would record and recognize the donor at $800K.  That is the value of the GIK.  Similarly, when I accept a horse, I do not remove the cost of feeding/stabling the horse from the value assigned the GIK.  Hope I am not missing something about your question.  ��

     

     






  • 4.  RE: Fees incurred when gift of mineral rights were sold

    Posted 08-26-2021 04:08 PM
    Thanks so much John and Tracy! I've recorded the full amount of the gift, and am waiting to hear from our Finance Department if they object. But now I feel like I'm in a better position to explain everything.

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    Robyn Smith
    Director of Advancement Services
    Randolph College
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